CYNTHIA C. ALABAN, G.R. No. 156021 FRANCIS COLLADO, JOSE P.

COLLADO, JUDITH Present: PROVIDO, CLARITA PROVIDO, ALFREDO PROVIDO, MANUEL PUNO, J., PROVIDO, JR., LORNA DINA Chairman, E. PROVIDO, SEVERO ARENGA, AUSTRIA-MARTINEZ, JR., SERGIO ARENGA, EDUARDO CALLEJO, SR., ARENGA, CAROL ARENGA, RUTH TINGA, and BABASA, NORMA HIJASTRO, CHICO-NAZARIO, JJ. DOLORES M. FLORES, ANTONIO MARIN, JR., JOSE MARIN, SR., and MATHILDE MARIN, Promulgated: Petitioners, September 23, 2005 - versus COURT OF APPEALS and FRANCISCO H. PROVIDO, Respondents. x-------------------------------------------------------------------x DECISION TINGA, J.: This is a petition for review of the Resolutions[1] of the Court of Appeals (CA) in CA-G.R. SP No. 69221,[2] dismissing petitioners petition for annulment of judgment. On 8 November 2000, respondent Francisco Provido (respondent) filed a petition, docketed as SP Proc. No. 00-135, for the probate of theLast Will and Testament[3] of the late Soledad Provido Elevencionado (decedent), who died on 26 October 2000 in Janiuay, Iloilo.[4] Respondent alleged that he was the heir of the decedent and the executor of her will. On 30 May 2001, the Regional Trial Court (RTC), Branch 68, in P.D. Monfort North, Dumangas, Iloilo, rendered its Decision, [5] allowing the probate of the will of the decedent and directing the issuance of letters testamentary to respondent.[6] More than four (4) months later, or on 4 October 2001, herein petitioners filed a motion for the reopening of the probate proceedings.[7] Likewise, they filed an opposition to the allowance of the will of the decedent, as well as the issuance of letters testamentary to respondent,[8] claiming that they are the intestate heirs of the decedent. Petitioners claimed that the RTC did not acquire jurisdiction over the petition due to non-payment of the correct docket fees, defective publication, and lack of notice to the other heirs. Moreover, they alleged that the will could not have been probated because: (1) the signature of the decedent was forged; (2) the will was not executed in accordance with law, that is, the witnesses failed to sign below the attestation clause; (3) the decedent lacked testamentary capacity to execute and publish a will; (4) the will was executed by force and under duress and improper pressure; (5) the decedent had no intention to make a will at the time of affixing of her signature; and (6) she did not know the properties to be disposed of, having included in the will properties which no longer belonged to her. Petitioners prayed that the letters testamentary issued to respondent be withdrawn and the estate of the decedent disposed of under intestate succession.[9] On 11 January 2002, the RTC issued an Order[10] denying petitioners motion for being unmeritorious. Resolving the issue of jurisdiction, the RTC held that petitioners were deemed notified of the hearing by publication and that the deficiency in the payment of docket fees is not a ground for the outright dismissal of the petition. It merely required respondent to pay the deficiency.[11] Moreover, the RTCs Decision was already final and executory even before petitioners filing of the motion to reopen.[12] Petitioners thereafter filed a petition[13] with an application for preliminary injunction with the CA, seeking the annulment of the RTCsDecision dated 30 May 2001 and Order dated 11 January 2002. They claimed that after the death of the decedent, petitioners, together with respondent, held several conferences to discuss the matter of dividing the estate of the decedent, with respondent agreeing to a one-sixth (1/6) portion as his share. Petitioners allegedly drafted a compromise agreement to implement the division of the estate. Despite receipt of the agreement, respondent refused to sign and return the same. Petitioners opined that respondent feigned interest in participating in the compromise agreement so that they would not suspect his intention to secure the probate of the will.[14] They claimed that they learnt of the probate proceedings only in July of 2001, as a result of which they filed their motion to reopen the proceedings and admit their opposition to the probate of the will only on 4 October 2001. They argued that the RTC Decision should be annulled and set aside on the ground of extrinsic fraud and lack of jurisdiction on the part of the RTC.[15] In its Resolution[16] promulgated on 28 February 2002, the CA dismissed the petition. It found that there was no showing that petitioners failed to avail of or resort to the ordinary remedies of new trial, appeal, petition for relief from judgment, or other appropriate remedies through no fault of their own.[17] Moreover, the CA declared as baseless petitioners claim that the proceedings in the RTC was attended by extrinsic fraud. Neither was there any showing that they availed of this ground in a

motion for new trial or petition for relief from judgment in the RTC, the CA added. [18] Petitioners sought reconsideration of the Resolution, but the same was denied by the CA for lack of merit.[19] Petitioners now come to this Court, asserting that the CA committed grave abuse of discretion amounting to lack of jurisdiction when it dismissed their petition for the alleged failure to show that they have not availed of or resorted to the remedies of new trial, appeal, petition for relief from judgment or other remedies through no fault of their own, and held that petitioners were not denied their day in court during the proceedings before the RTC. [20] In addition, they assert that this Court has yet to decide a case involving Rule 47 of the Rules of Court and, therefore, the instant petition should be given due course for the guidance of the bench and bar.[21] For his part, respondent claims that petitioners were in a position to avail of the remedies provided in Rules 37 and 38, as they in fact did when they filed a motion for new trial. [22] Moreover, they could have resorted to a petition for relief from judgment since they learned of the RTCs judgment only three and a half months after its promulgation. [23] Respondent likewise maintains that no extrinsic fraud exists to warrant the annulment of the RTCs Decision, since there was no showing that they were denied their day in court. Petitioners were not made parties to the probate proceedings because the decedent did not institute them as her heirs.[24] Besides, assuming arguendo that petitioners are heirs of the decedent, lack of notice to them is not a fatal defect since personal notice upon the heirs is a matter of procedural convenience and not a jurisdictional requisite.[25] Finally, respondent charges petitioners of forumshopping, since the latter have a pending suit involving the same issues as those in SP No. 00-135, that is SP No. 1181[26] filed before Branch 23, RTC of General Santos City and subsequently pending on appeal before the CA in CA-G.R. No.74924.[27] It appears that one of the petitioners herein, Dolores M. Flores (Flores), who is a niece of the decedent, filed a petition for letters of administration with the RTC of General Santos City, claiming that the decedent died intestate without any issue, survived by five groups of collateral heirs. Flores, armed with a Special Power of Attorney from most of the other petitioners, prayed for her appointment as administratrix of the estate of the decedent. The RTC dismissed the petition on the ground of lack of jurisdiction, stating that the probate court in Janiuay, Iloilo has jurisdiction since the venue for a petition for the settlement of the estate of a decedent is the place where the decedent died. This is also in accordance with the rule that the first court acquiring jurisdiction shall continue hearing the case to the exclusion of other courts, the RTC added.[28] On 9 January 2002, Flores filed a Notice of Appeal [29] and on 28 January 2002, the case was ordered forwarded to the CA.[30] Petitioners maintain that they were not made parties to the case in which the decision sought to be annulled was rendered and, thus, they could not have availed of the ordinary remedies of new trial, appeal, petition for relief from judgment and other appropriate remedies, contrary to the ruling of the CA. They aver that respondents offer of a false compromise and his failure to notify them of the probate of the will constitute extrinsic fraud that necessitates the annulment of the RTCs judgment.[31] The petition is devoid of merit. Section 37 of the Rules of Court allows an aggrieved party to file a motion for new trial on the ground of fraud, accident, mistake, or excusable negligence. The same Rule permits the filing of a motion for reconsideration on the grounds of excessive award of damages, insufficiency of evidence to justify the decision or final order, or that the decision or final order is contrary to law.[32] Both motions should be filed within the period for taking an appeal, or fifteen (15) days from notice of the judgment or final order. Meanwhile, a petition for relief from judgment under Section 3 of Rule 38 is resorted to when a judgment or final order is entered, or any other proceeding is thereafter taken, against a party in any court through fraud, accident, mistake, or excusable negligence. Said party may file a petition in the same court and in the same case to set aside the judgment, order or proceeding. It must be filed within sixty (60) days after the petitioner learns of the judgment and within six (6) months after entry thereof.[33] A motion for new trial or reconsideration and a petition for relief from judgment are remedies available only to parties in the proceedings where the assailed judgment is rendered.[34] In fact, it has been held that a person who was never a party to the case, or even summoned to appear therein, cannot avail of a petition for relief from judgment.[35] However, petitioners in this case are mistaken in asserting that they are not or have not become parties to the probate proceedings. Under the Rules of Court, any executor, devisee, or legatee named in a will, or any other person interested in the estate may, at any time after the death of the testator, petition the court having jurisdiction to have the will allowed. [36] Notice of the time and place for proving the will must be published for three (3) consecutive weeks, in a newspaper of general circulation in the province,[37] as well as furnished to the designated or other known heirs, legatees, and devisees of the testator.[38] Thus, it has been held that a proceeding for the probate of a will is one in rem, such that with the corresponding publication of the petition the court's jurisdiction extends to all persons interested in said will or in the settlement of the estate of the decedent.[39] Publication is notice to the whole world that the proceeding has for its object to bar indefinitely all who might be minded to make an objection of any sort against the right sought to be established. It is the publication of such notice that brings in the whole world as a party in the case and vests the court with jurisdiction to hear and decide it. [40] Thus, even though petitioners were not mentioned in the petition for probate, they eventually became parties thereto as a consequence of the publication of the notice of hearing.

As parties to the probate proceedings, petitioners could have validly availed of the remedies of motion for new trial or reconsideration and petition for relief from judgment. In fact, petitioners filed a motion to reopen, which is essentially a motion for new trial, with petitioners praying for the reopening of the case and the setting of further proceedings. However, the motion was denied for having been filed out of time, long after the Decision became final and executory. Conceding that petitioners became aware of the Decision after it had become final, they could have still filed a petition for relief from judgment after the denial of their motion to reopen. Petitioners claim that they learned of the Decision only on 4 October 2001, or almost four (4) months from the time the Decision had attained finality. But they failed to avail of the remedy. For failure to make use without sufficient justification of the said remedies available to them, petitioners could no longer resort to a petition for annulment of judgment; otherwise, they would benefit from their own inaction or negligence.[41] Even casting aside the procedural requisite, the petition for annulment of judgment must still fail for failure to comply with the substantive requisites, as the appellate court ruled. An action for annulment of judgment is a remedy in law independent of the case where the judgment sought to be annulled was rendered.[42] The purpose of such action is to have the final and executory judgment set aside so that there will be a renewal of litigation. It is resorted to in cases where the ordinary remedies of new trial, appeal, petition for relief from judgment, or other appropriate remedies are no longer available through no fault of the petitioner,[43] and is based on only two grounds: extrinsic fraud, and lack of jurisdiction or denial of due process. [44] A person need not be a party to the judgment sought to be annulled, and it is only essential that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected thereby.[45] An action to annul a final judgment on the ground of fraud lies only if the fraud is extrinsic or collateral in character. Fraud is regarded as extrinsic where it prevents a party from having a trial or from presenting his entire case to the court, or where it operates upon matters pertaining not to the judgment itself but to the manner in which it is procured. The overriding consideration when extrinsic fraud is alleged is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in court.[47]
[46]

To sustain their allegation of extrinsic fraud, petitioners assert that as a result of respondents deliberate omission or concealment of their names, ages and residences as the other heirs of the decedent in his petition for allowance of the will, they were not notified of the proceedings, and thus they were denied their day in court. In addition, they claim that respondents offer of a false compromise even before the filing of the petition prevented them from appearing and opposing the petition for probate. The Court is not convinced.

According to the Rules, notice is required to be personally given to known heirs, legatees, and devisees of the testator.[48] A perusal of the will shows that respondent was instituted as the sole heir of the decedent. Petitioners, as nephews and nieces of the decedent, are neither compulsory nor testate heirs[49] who are entitled to be notified of the probate proceedings under the Rules. Respondent had no legal obligation to mention petitioners in the petition for probate, or to personally notify them of the same. Besides, assuming arguendo that petitioners are entitled to be so notified, the purported infirmity is cured by the publication of the notice. After all, personal notice upon the heirs is a matter of procedural convenience and not a jurisdictional requisite.[50] The non-inclusion of petitioners names in the petition and the alleged failure to personally notify them of the proceedings do not constitute extrinsic fraud. Petitioners were not denied their day in court, as they were not prevented from participating in the proceedings and presenting their case before the probate court. One other vital point is the issue of forum-shopping against petitioners. Forum-shopping consists of filing multiple suits in different courts, either simultaneously or successively, involving the same parties, to ask the courts to rule on the same or related causes and/or to grant the same or substantially same reliefs,[51] on the supposition that one or the other court would make a favorable disposition.[52] Obviously, the parties in the instant case, as well as in the appealed case before the CA, are the same. Both cases deal with the existence and validity of the alleged will of the decedent, with petitioners anchoring their cause on the state of intestacy. In the probate proceedings, petitioners position has always been that the decedent left no will and if she did, the will does not comply with the requisites of a valid will. Indeed, that position is the bedrock of their present petition. Of course, respondent maintains the contrary stance. On the other hand, in the petition for letters of administration, petitioner Flores prayed for her appointment as administratrix of the estate on the theory that the decedent died intestate. The petition was dismissed on the ground of lack of jurisdiction, and it is this order of dismissal which is the subject of review in CA-G.R. No. 74924. Clearly, therefore, there is forum-shopping. Moreover, petitioners failed to inform the Court of the said pending case in their certification against forumshopping. Neither have they done so at any time thereafter. The Court notes that even in the petition for annulment of

judgment, petitioners failed to inform the CA of the pendency of their appeal in CA-G.R. No. 74924, even though the notice of appeal was filed way before the petition for annulment of judgment was instituted. WHEREFORE, the petition is DENIED. Costs against petitioners. SO ORDERED. JULIO B. PURCON, JR., PETITIONER, VS. MRM PHILIPPINES, INC. AND MIGUEL L. RIVERA/MARITIME RESOURCES MANAGEMENT, RESPONDENTS. RESOLUTION REYES, R.T., J.: A PETITION for relief from judgment under Rule 38 of the 1997 Rules of Civil Procedure is an equitable remedy that is allowed only in exceptional cases when there is no other available or adequate remedy. It may be availed of only after a judgment, final order, or other proceeding was taken against petitioner in any court through fraud, accident, mistake, or excusable negligence.[1] Before Us is a petition for relief from judgment [2] filed by Julio B. Purcon, seeking to set aside Our July 16, 2007 Resolution, [3] which denied his petition for review, as well as the October 9, 2007 Entry of Judgment. [4] He pleads for the Court's leniency on account of the negligence and inefficiency of his counsel, which resulted in the late filing of the petition and in filing defective pleadings within this Court. The Antecedents The case stemmed from a complaint filed by petitioner for reimbursement of medical expenses, sickness allowance and permanent disability benefits with prayer for compensatory, moral and exemplary damages and attorney's fees before the Arbitration Branch of the National Labor Relations Commission (NLRC). In his verified position paper, petitioner alleged that on January 28, 2002, respondent MRM Philippines, Inc. hired him as a seaman on board the vessel M/T SARABELLE 2. He signed a contract for three (3) months with a monthly salary of $584.00. According to petitioner, his work involved a day-to-day activity that required exertion of strenuous effort, and that he often worked overtime due to the pressure of his work. His contract was extended for another three (3) months. On the second week of June 2002, he felt an excruciating pain in his left testicle. After being examined by a doctor at the port of France, he was diagnosed with hernia. On June 26, 2002, he was repatriated due to his ailment. Upon petitioner's return to the Philippines, he was examined by Dr. Alegre, the company physician, who prescribed certain medication. On July 24, 2002, Dr. Alegre declared that he was fit to resume work. When he reported to MRM Philippines, Inc. hoping to be re-hired for another contract, he was told that there was no vacancy for him. On September 17, 2003, he consulted Dr. Efren R. Vicaldo, an internist-cardiologist of Philippine Heart Center. On March 3, 2004, after a thorough medical examination and evaluation, he was diagnosed with EPIDIDYMITIS, LEFT; UPPER RESPIRATORY TRACT INFACTION WITH INPEDIMENT GRADE XIV. Respondents, on the other hand, countered that since petitioner's ailment, hernia, is not work-related, he is not entitled to disability benefit and related claims. In fact, he was declared fit to resume work on July 23, 2002 by the company-designated physician. Respondents likewise argued that his ailment is not to be considered a permanent disability as this is easily correctable by simple surgery. More importantly, petitioner signed a Quitclaim and Release which was notarized. On March 31, 2005, Labor Arbiter Donato G. Quinto, Jr. rendered its decision[5]dismissing the complaint for utter lack of merit. The Labor Arbiter explained that petitioner was fit to resume work as a seafarer as of July 23, 2002 as his "hernia" was already cured or non-existent. In fact, petitioner was ready to resume work. Unfortunately, he was not accommodated due to lack of vacancy. The fact that he was not re-hired by respondent did not mean that he was suffering from disability. On May 5, 2005, complainant-appellant (petitioner) filed a memorandum of appeal with the NLRC Third Division. On September 30, 2005, the NLRC Third Division issued a resolution[6] as follows: WHEREFORE, the appeal is DISMISSED for lack of merit and the assailed decision dated March 31, 2005 is hereby AFFIRMED. SO ORDERED.[7] On December 20, 2005, the motion for reconsideration was dismissed for lack of merit. On January 27, 2006, the NLRC resolution became final and executory and was recorded in the Book of Entries of Judgments. On March 2, 2006, petitioner filed a petition for certiorari under Rule 65 of the Revised Rules of Court with the Court of Appeals (CA). However, on June 7, 2006, the CA dismissed the case due to formal infirmities. Petitioner's motion for reconsideration was denied. On September 29, 2006, the CA resolution became final and executory. On May 9, 2007, petitioner filed with this Court a petition for review on certiorariunder Rule 45 of the 1997 Rules of Civil Procedure assailing the June 7, 2006 and September 5, 2006 Resolutions of the CA, which dismissed his petition for certiorari. In Our Resolution[8] dated July 16, 2007, We denied the petition for the following reasons: (1) the petition was filed beyond

the reglementary period of fifteen (15) days fixed in Section 2, Rule 45 in relation to Section 5(a), Rule 56, 1997 Rules of Civil Procedure, as amended; (2) failure to pay on time docket and other fees and deposit for costs in violation of Section 3, Rule 45, in relation to Section 5(c) of Rule 56; and (3) insufficient or defective verification under Section 4, Rule 7. We likewise held that petitioner failed to sufficiently show that the CA committed any reversible error in the challenged resolutions as to warrant the exercise of this Court's discretionary appellate jurisdiction. He was not able to convince this Court why the actions of the Labor Arbiter, the NLRC and the CA, which have passed upon the same issue, should be reversed. Consequently, on October 9, 2007, an Entry of Judgment was issued. On May 6, 2008, petitioner filed the instant petition for relief from judgment interposing the following grounds: I. The Honorable Labor Arbiter committed a GROSS MISTAKE when he based his decision on the fit to work certification issued by the company-designated physician and on the Quitclaim and Release executed by the complainant; The Honorable Labor Arbiter further committed a GROSS MISTAKE when he adopted the irrelevant jurisprudence cited by the respondents and by adopting it in his decision; The Honorable NLRC Third Division also committed a GROSS MISTAKE when it affirms the ERRONEOUS decision of the Honorable Labor Arbiter; The factual findings of the Honorable Labor Arbiter, and the Honorable NLRC Third Division, are not based on substantial evidence and that their decisions are contrary to the applicable law and jurisprudence; and The collaborating counsel of the petitioner committed a GROSS MISTAKE in filing defective pleadings to the prejudice of the herein petitioner.[9]

II.

III.

IV.

V.

The threshold issue before Us is - Can petitioner avail of a petition for relief from judgment under Rule 38 of the 1997 Rules of Civil Procedure from Our resolution denying his petition for review? We answer in the negative. A petition for relief from judgment is not an available remedy in the Supreme Court. First, although Section 1 of Rule 38 states that when a judgment or final order is entered through fraud, accident, mistake, or excusable negligence, a party in any court may file a petition for relief from judgment, this rule must be interpreted in harmony with Rule 56, which enumerates the original cases cognizable by the Supreme Court, thus: Section 1. Original cases cognizable. - Only petitions for certiorari, prohibition, mandamus, quo warranto, habeas corpus, disciplinary proceedings against members of the judiciary and attorneys, and cases affecting ambassadors, other public ministers and consuls may be filed originally in the Supreme Court. A petition for relief from judgment is not included in the list of Rule 56 cases originally cognizable by this Court. In Dela Cruz v. Andres,[10] We reiterated Our pronouncement in Mesina v. Meer,[11]that a petition for relief from judgment is not an available remedy in the Court of Appeals and the Supreme Court. The Court explained that under the 1997 Revised Rules of Civil Procedure, the petition for relief must be filed within sixty (60) days after petitioner learns of the judgment, final order or other proceeding to be set aside and must be accompanied with affidavits showing the fraud, accident, mistake, or excusable negligence relied upon, and the facts constituting petitioner's good and substantial cause of action or defense, as the case may be. Most importantly, it should be filed with the same court which rendered the decision, viz.: Section 1. Petition for relief from judgment, order, or other proceedings. - When a judgment or final order is entered, or any other proceeding is thereafter taken against a party in any court through fraud, accident, mistake, or excusable negligence, he may file a petition in such court and in the same case praying that the judgment, order or proceeding be set aside. [12] (Underscoring supplied) Second, while Rule 38 uses the phrase "any court," it refers only to Municipal/Metropolitan and Regional Trial Courts. As revised, Rule 38 radically departs from the previous rule as it now allows the Metropolitan or Municipal Trial Court which decided the case or issued the order to hear the petition for relief. Under the old rule, a petition for relief from the judgment or final order of Municipal Trial Courts should be filed with the Regional Trial Court,viz.: Section 1. Petition to Court of First Instance for relief from judgment of inferior court. - When a judgment is rendered by an inferior court on a case, and a party thereto by fraud, accident, mistake, or excusable negligence, has been unjustly deprived of a hearing therein, or has been prevented from taking an appeal, he may file a petition in the Court of First Instance of the province in which the original judgment was rendered, praying that such judgment be set aside and the case tried upon its merits. Section 2. Petition to Court of First Instance for relief from the judgment or other proceeding thereof. - When a judgment order is entered, or any other proceeding is taken against a party in a Court of First Instance through fraud, accident, mistake, or excusable negligence, he may file a petition in such court and in the same case praying that the judgment, order or proceeding be set aside. The procedural change in Rule 38 is in line with Rule 5, prescribing uniform procedure for Municipal and Regional Trial Courts[13] and designation of Municipal/Metropolitan Trial Courts as courts of record.[14] Third, the procedure in the CA and the Supreme Court are governed by separate provisions of the Rules of Court. [15] It may, from time to time, be supplemented by additional rules promulgated by the Supreme Court through resolutions or circulars.

As it stands, neither the Rules of Court nor the Revised Internal Rules of the CA[16]allows the remedy of petition for relief in the CA. There is no provision in the Rules of Court making the petition for relief applicable in the CA or this Court. The procedure in the CA from Rules 44 to 55, with the exception of Rule 45 which pertains to the Supreme Court, identifies the remedies available before said Court such as annulment of judgments or final orders or resolutions (Rule 47), motion for reconsideration (Rule 52), and new trial (Rule 53). Nowhere is a petition for relief under Rule 38 mentioned. If a petition for relief from judgment is not among the remedies available in the CA,with more reason that this remedy cannot be availed of in the Supreme Court. This Court entertains only questions of law. A petition for relief raises questions of facts on fraud, accident, mistake, or excusable negligence, which are beyond the concerns of this Court. Nevertheless, even if We delve into the merits of the petition, the same must still be dismissed. The late filing of the petition for review does not amount to excusable negligence. Petitioner's lack of devotion in discharging his duty, without demonstrating fraud, accident, mistake or excusable negligence, cannot be a basis for judicial relief. For a claim of counsel's gross negligence to prosper, nothing short of clear abandonment of the client's cause must be shown. The relief afforded by Rule 38 will not be granted to a party who seeks to be relieved from the effects of the judgment when the loss of the remedy of law was due to his own negligence, or mistaken mode of procedure for that matter; otherwise the petition for relief will be tantamount to reviving the right of appeal which has already been lost, either because of inexcusable negligence or due to a mistake of procedure by counsel. In exceptional cases, when the mistake of counsel is so palpable that it amounts to gross negligence, this Court affords a party a second opportunity to vindicate his right. But this opportunity is unavailing in the instant case, especially since petitioner has squandered the various opportunities available to him at the different stages of this case. Public interest demands an end to every litigation and a belated effort to reopen a case that has already attained finality will serve no purpose other than to delay the administration of justice. Finally, it is a settled rule that relief will not be granted to a party who seeks to be relieved from the effects of the judgment when the loss of the remedy at law was due to his own negligence, or a mistaken mode of procedure; otherwise, the petition for relief will be tantamount to reviving the right of appeal which has already been lost either because of inexcusable negligence or due to mistaken mode of procedure by counsel.[17] ACCORDINGLY, SO ORDERED. the petition is DISMISSED.

THE HEIRS OF MARCELINO G.R. No. 169454 DORONIO, NAMELY: REGINA AND FLORA, BOTH SURNAMED DORONIO, Present: Petitioners, YNARES-SANTIAGO, Chairperson, - versus - AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and HEIRS OF FORTUNATO REYES, JJ. DORONIO, NAMELY: TRINIDAD ROSALINA DORONIO-BALMES, MODING DORONIO, FLORENTINA J.,

DORONIO, AND ANICETA Promulgated: ALCANTARA-MANALO, Respondents. December 27, 2007 x--------------------------------------------------x DECISION REYES, R.T., J.: For Our review on certiorari is the Decision1 of the Court of Appeals (CA) reversing that 2 of the Regional Trial Court (RTC), Branch 45, Anonas, Urdaneta City, Pangasinan, in an action for reconveyance and damages. The CA declared respondents as rightful owners of one-half of the subject property and directed petitioners to execute a registerable document conveying the same to respondents. The Facts Spouses Simeon Doronio and Cornelia Gante, now both deceased, were the registered owners of a parcel of land located at Barangay Cabalitaan, Asingan, Pangasinan covered by Original Certificate of Title (OCT) No. 352. 3 The courts below described it as follows: Un terreno (Lote 1018), situada en el municipio de Asingan, Linda por el NE; con propriedad de Gabriel Bernardino; con el SE con propriedad de Zacarias Najorda y Alejandro Najorda; por el SO con propriedad de Geminiano Mendoza y por el NO con el camino para Villasis; midiendo una extension superficial mil ciento cincuenta y dos metros cuadrados.4 The spouses had children but the records fail to disclose their number. It is clear, however, that Marcelino Doronio and Fortunato Doronio, now both deceased, were among them and that the parties in this case are their heirs. Petitioners are the heirs of Marcelino Doronio, while respondents are the heirs of Fortunato Doronio. On April 24, 1919, a private deed of donation propter nuptias 5 was executed by spouses Simeon Doronio and Cornelia Gante in favor of Marcelino Doronio and the latters wife, Veronica Pico. One of the properties subject of said deed of donation is the one that it described as follows: Fourth A piece of residential land located in the barrio of Cabalitian but we did not measure it, the area is bounded on the north by Gabriel Bernardino; on the east by Fortunato Doronio; on the south by Geminiano Mendoza and on the west by a road to Villasis. Constructed on said land is a house of light materials also a part of the dowry. Value 200.00.6 It appears that the property described in the deed of donation is the one covered by OCT No. 352. However, there is a significant discrepancy with respect to the identity of the owner of adjacent property at the eastern side. Based on OCT No. 352, the adjacent owners are Zacarias Najorda and Alejandro Najorda, whereas based on the deed of donation, the owner of the adjacent property is Fortunato Doronio. Furthermore, said deed of donation remained a private document as it was never notarized.7 Both parties have been occupying the subject land for several decades 8 although they have different theories regarding its present ownership. According to petitioners, they are now the owners of the entire property in view of the private deed of donation propter nuptias in favor of their predecessors, Marcelino Doronio and Veronica Pico. Respondents, on the other hand, claim that only half of the property was actually incorporated in the said deed of donation because it stated that Fortunato Doronio, instead of Zacarias Najorda and Alejandro Najorda, is the owner of the adjacent property at the eastern side. Respondents posit that the donors respected and segregated the possession of Fortunato Doronio of the eastern half of the land. They are the ones who have been possessing said land occupied by their predecessor, Fortunato Doronio. Eager to obtain the entire property, the heirs of Marcelino Doronio and Veronica Pico filed, on January 11, 1993, before the RTC in Urdaneta, Pangasinan a petition "For the Registration of a Private Deed of Donation"9docketed as Petition Case No. U920. No respondents were named in the said petition10 although notices of hearing were posted on the bulletin boards of Barangay Cabalitaan, Municipalities of Asingan and Lingayen.11 During the hearings, no one interposed an objection to the petition.12 After the RTC ordered a general default,13 the petition was eventually granted on September 22, 1993. This led to the registration of the deed of donation, cancellation of OCT No. 352 and issuance of a new Transfer Certificate of Title (TCT) No. 44481 in the names of Marcelino Doronio and Veronica Pico.14 Thus, the entire property was titled in the names of petitioners predecessors.

On April 28, 1994, the heirs of Fortunato Doronio filed a pleading before the RTC in the form of a petition in the same Petition Case No. U-920. The petition was for the reconsideration of the decision of the RTC that ordered the registration of the subject deed of donation. It was prayed in the petition that an order be issued declaring null and void the registration of the private deed of donation and that TCT No. 44481 be cancelled. However, the petition was dismissed on May 13, 1994 on the ground that the decision in Petition Case No. U-920 had already become final as it was not appealed. Determined to remain in their possessed property, respondent heirs of Fortunato Doronio (as plaintiffs) filed an action for reconveyance and damages with prayer for preliminary injunction15 against petitioner heirs of Marcelino Doronio (as defendants) before the RTC, Branch 45, Anonas, Urdaneta City, Pangasinan. Respondents contended, among others, that the subject land is different from what was donated as the descriptions of the property under OCT No. 352 and under the private deed of donation were different. They posited that spouses Simeon Doronio and Cornelia Gante intended to donate only onehalf of the property. During the pre-trial conference, the parties stipulated, among others, that the property was originally covered by OCT No. 352 which was cancelled by TCT No. 44481. They also agreed that the issues are: (1) whether or not there was a variation in the description of the property subject of the private deed of donation and OCT No. 352; (2) whether or not respondents had acquired one-half of the property covered by OCT No. 352 by acquisitive prescription; (3) whether or not the transfer of the whole property covered by OCT No. 352 on the basis of the registration of the private deed of donation notwithstanding the discrepancy in the description is valid; (4) whether or not respondents are entitled to damages; and (5) whether or not TCT No. 44481 is valid.16 RTC Decision After due proceedings, the RTC ruled in favor of petitioner heirs of Marcelino Doronio (defendants). It concluded that the parties admitted the identity of the land which they all occupy; 17 that a title once registered under the torrens system cannot be defeated by adverse, open and notorious possession or by prescription;18 that the deed of donation in consideration of the marriage of the parents of petitioners is valid, hence, it led to the eventual issuance of TCT No. 44481 in the names of said parents;19 and that respondent heirs of Fortunato Doronio (plaintiffs) are not entitled to damages as they are not the rightful owners of the portion of the property they are claiming.20 The RTC disposed of the case, thus: WHEREFORE, premises considered, the Court hereby renders judgment DISMISSING the herein Complaint filed by plaintiffs against defendants.21 Disagreeing with the judgment of the RTC, respondents appealed to the CA. They argued that the trial court erred in not finding that respondents predecessor-in-interest acquired one-half of the property covered by OCT No. 352 by tradition and/or intestate succession; that the deed of donation dated April 26, 1919 was null and void; that assuming that the deed of donation was valid, only one-half of the property was actually donated to Marcelino Doronio and Veronica Pico; and that respondents acquired ownership of the other half portion of the property by acquisitive prescription.22 CA Disposition In a Decision dated January 26, 2005, the CA reversed the RTC decision with the following disposition: WHEREFORE, the assailed Decision dated June 28, 2002 is REVERSED and SET ASIDE. Declaring the appellants as rightful owners of one-half of the property now covered by TCT No. 44481, the appellees are hereby directed to execute a registerable document conveying the same to appellants. SO ORDERED.23 The appellate court determined that "(t)he intention to donate half of the disputed property to appellees predecessors can be gleaned from the disparity of technical descriptions appearing in the title (OCT No. 352) of spouses Simeon Doronio and Cornelia Gante and in the deed of donation propter nuptias executed on April 24, 1919 in favor of appellees predecessors."24 The CA based its conclusion on the disparity of the following technical descriptions of the property under OCT No. 352 and the deed of donation, to wit: The court below described the property covered by OCT No. 352 as follows: "Un terreno (Lote 1018), situada en el municipio de Asingan, Linda por el NE; con propriedad de Gabriel Bernardino; con el SE con propriedad de Zacarias Najorda y Alejandro Najorda; por el SO con propriedad de Geminiano Mendoza y por el NO con el camino para Villasis; midiendo una extension superficial mil ciento cincuenta y dos metros cuadrados." On the other hand, the property donated to appellees predecessors was described in the deed of donation as:

"Fourth A piece of residential land located in the barrio of Cabalitian but we did not measure it, the area is bounded on the north by Gabriel Bernardino; on the east by Fortunato Doronio; on the south by Geminiano Mendoza and on the west by a road to Villasis. Constructed on said land is a house of light materials also a part of the dowry. Value 200.00." 25 (Emphasis ours) Taking note "that the boundaries of the lot donated to Marcelino Doronio and Veronica Pico differ from the boundaries of the land owned by spouses Simeon Doronio and Cornelia Gante," the CA concluded that spouses Simeon Doronio and Cornelia Gante donated only half of the property covered by OCT No. 352.26 Regarding the allegation of petitioners that OCT No. 352 is inadmissible in evidence, the CA pointed out that, "while the OCT is written in the Spanish language, this document already forms part of the records of this case for failure of appellees to interpose a timely objection when it was offered as evidence in the proceedings a quo. It is a well-settled rule that any objection to the admissibility of such evidence not raised will be considered waived and said evidence will have to form part of the records of the case as competent and admitted evidence."27 The CA likewise ruled that the donation of the entire property in favor of petitioners predecessors is invalid on the ground that it impairs the legitime of respondents predecessor, Fortunato Doronio. On this aspect, the CA reasoned out: Moreover, We find the donation of the entire property in favor of appellees predecessors invalid as it impairs the legitime of appellants predecessor. Article 961 of the Civil Code is explicit. "In default of testamentary heirs, the law vests the inheritance, x x x, in the legitimate x x x relatives of the deceased, x x x." As Spouses Simeon Doronio and Cornelia Gante died intestate, their property shall pass to their lawful heirs, namely: Fortunato and Marcelino Doronio. Donating the entire property to Marcelino Doronio and Veronica Pico and excluding another heir, Fortunato, tantamounts to divesting the latter of his rightful share in his parents inheritance. Besides, a persons prerogative to make donations is subject to certain limitations, one of which is that he cannot give by donation more than what he can give by will (Article 752, Civil Code). If he does, so much of what is donated as exceeds what he can give by will is deemed inofficious and the donation is reducible to the extent of such excess.28 Petitioners were not pleased with the decision of the CA. Hence, this petition under Rule 45. Issues Petitioners now contend that the CA erred in: 1. DECLARING ADMISSIBILITY OF THE ORIGINAL CERTIFICATE OF TITLE NO. 352 DESPITE OF LACK OF TRANSLATION THEREOF. 2. (RULING THAT) ONLY HALF OF THE DISPUTED PROPERTY WAS DONATED TO THE PREDECESSORS-IN-INTEREST OF THE HEREIN APPELLANTS. 3. (ITS) DECLARATION THAT THE DONATION PROPTER NUPTIAS IS INNOFICIOUS, IS PREMATURE, AND THUS IT IS ILLEGAL AND UNPROCEDURAL.29 Our Ruling OCT No. 352 in Spanish Although Not Translated into English or Filipino Is Admissible For Lack of Timely Objection Petitioners fault the CA for admitting OCT No. 352 in evidence on the ground that it is written in Spanish language. They posit that "(d)ocumentary evidence in an unofficial language shall not be admitted as evidence, unless accompanied with a translation into English or Filipino."30 The argument is untenable. The requirement that documents written in an unofficial language must be accompanied with a translation in English or Filipino as a prerequisite for its admission in evidence must be insisted upon by the parties at the trial to enable the court, where a translation has been impugned as incorrect, to decide the issue. 31 Where such document, not so accompanied with a translation in English or Filipino, is offered in evidence and not objected to, either by the parties or the court, it must be presumed that the language in which the document is written is understood by all, and the document is admissible in evidence.32 Moreover, Section 36, Rule 132 of the Revised Rules of Evidence provides: SECTION 36. Objection. Objection to evidence offered orally must be made immediately after the offer is made.

Objection to a question propounded in the course of the oral examination of a witness shall be made as soon as the grounds therefor shall become reasonably apparent. An offer of evidence in writing shall be objected to within three (3) days after notice of the offer unless a different period is allowed by the court. In any case, the grounds for the objections must be specified. (Emphasis ours) Since petitioners did not object to the offer of said documentary evidence on time, it is now too late in the day for them to question its admissibility. The rule is that evidence not objected may be deemed admitted and may be validly considered by the court in arriving at its judgment.33 This is true even if by its nature, the evidence is inadmissible and would have surely been rejected if it had been challenged at the proper time.34 As a matter of fact, instead of objecting, petitioners admitted the contents of Exhibit "A," that is, OCT No. 352 in their comment35 on respondents formal offer of documentary evidence. In the said comment, petitioners alleged, among others, that "Exhibits A, B, C, D, E, F and G, are admitted but not for the purpose they are offered because these exhibits being public and official documents are the best evidence of that they contain and not for what a party would like it to prove."36 Said evidence was admitted by the RTC.37 Once admitted without objection, even though not admissible under an objection, We are not inclined now to reject it.38Consequently, the evidence that was not objected to became property of the case, and all parties to the case are considered amenable to any favorable or unfavorable effects resulting from the said evidence.39 Issues on Impairment of Legitime Should Be Threshed Out in a Special Proceeding, Not in Civil Action for Reconveyance and Damages On the other hand, petitioners are correct in alleging that the issue regarding the impairment of legitime of Fortunato Doronio must be resolved in an action for the settlement of estates of spouses Simeon Doronio and Cornelia Gante. It may not be passed upon in an action for reconveyance and damages. A probate court, in the exercise of its limited jurisdiction, is the best forum to ventilate and adjudge the issue of impairment of legitime as well as other related matters involving the settlement of estate.40 An action for reconveyance with damages is a civil action, whereas matters relating to settlement of the estate of a deceased person such as advancement of property made by the decedent, partake of the nature of a special proceeding. Special proceedings require the application of specific rules as provided for in the Rules of Court.41 As explained by the Court in Natcher v. Court of Appeals:42 Section 3, Rule 1 of the 1997 Rules of Civil Procedure defines civil action and special proceedings, in this wise: x x x a) A civil action is one by which a party sues another for the enforcement or protection of a right, or the prevention or redress of a wrong. A civil action may either be ordinary or special. Both are governed by the rules for ordinary civil actions, subject to specific rules prescribed for a special civil action. xxxx c) A special proceeding is a remedy by which a party seeks to establish a status, a right or a particular fact. As could be gleaned from the foregoing, there lies a marked distinction between an action and a special proceeding. An action is a formal demand of ones right in a court of justice in the manner prescribed by the court or by the law. It is the method of applying legal remedies according to definite established rules. The term "special proceeding" may be defined as an application or proceeding to establish the status or right of a party, or a particular fact. Usually, in special proceedings, no formal pleadings are required unless the statute expressly so provides. In special proceedings, the remedy is granted generally upon an application or motion. Citing American Jurisprudence, a noted authority in Remedial Law expounds further: It may accordingly be stated generally that actions include those proceedings which are instituted and prosecuted according to the ordinary rules and provisions relating to actions at law or suits in equity, and that special proceedings include those

proceedings which are not ordinary in this sense, but is instituted and prosecuted according to some special mode as in the case of proceedings commenced without summons and prosecuted without regular pleadings, which are characteristics of ordinary actions x x x. A special proceeding must therefore be in the nature of a distinct and independent proceeding for particular relief, such as may be instituted independently of a pending action, by petition or motion upon notice. Applying these principles, an action for reconveyance and annulment of title with damages is a civil action, whereas matters relating to settlement of the estate of a deceased person such as advancement of property made by the decedent, partake of the nature of a special proceeding, which concomitantly requires the application of specific rules as provided for in the Rules of Court. Clearly, matters which involve settlement and distribution of the estate of the decedent fall within the exclusive province of the probate court in the exercise of its limited jurisdiction. Thus, under Section 2, Rule 90 of the Rules of Court, questions as to advancement made or alleged to have been made by the deceased to any heir may be heard and determined by the court having jurisdiction of the estate proceedings, and the final order of the court thereon shall be binding on the person raising the questions and on the heir. While it may be true that the Rules used the word "may," it is nevertheless clear that the same provision contemplates a probate court when it speaks of the "court having jurisdiction of the estate proceedings." Corollarily, the Regional Trial Court in the instant case, acting in its general jurisdiction, is devoid of authority to render an adjudication and resolve the issue of advancement of the real property in favor of herein petitioner Natcher, inasmuch as Civil Case No. 71075 for reconveyance and annulment of title with damages is not, to our mind, the proper vehicle to thresh out said question. Moreover, under the present circumstances, the RTC of Manila, Branch 55, was not properly constituted as a probate court so as to validly pass upon the question of advancement made by the decedent Graciano Del Rosario to his wife, herein petitioner Natcher. We likewise find merit in petitioners contention that before any conclusion about the legal share due to a compulsory heir may be reached, it is necessary that certain steps be taken first. 43 The net estate of the decedent must be ascertained, by deducting all payable obligations and charges from the value of the property owned by the deceased at the time of his death; then, all donations subject to collation would be added to it. With the partible estate thus determined, the legitime of the compulsory heir or heirs can be established; and only then can it be ascertained whether or not a donation had prejudiced the legitimes.44 Declaration of Validity of Donation Can Be Challenged by an Interested Party Not Impleaded in Petition for Quieting of Title or Declaratory Relief or Where There is No Res Judicata. Moreover, This Court Can Consider a Factual Matter or Unassigned Error in the Interest of Substantial Justice. Nevertheless, petitioners cannot preclude the determination of validity of the deed of donation on the ground that (1) it has been impliedly admitted by respondents; (2) it has already been determined with finality by the RTC in Petition Case No. U920; or (3) the only issue in an action for reconveyance is who has a better right over the land.45 The validity of the private deed of donation propter nuptias in favor of petitioners predecessors was one of the issues in this case before the lower courts. The pre-trial order46 of the RTC stated that one of the issues before it is "(w)hether or not the transfer of the whole property covered by OCT No. 352 on the basis of the private deed of donation notwithstanding the discrepancy in the description is valid." Before the CA, one of the errors assigned by respondents is that "THE TRIAL COURT ERRED IN NOT FINDING THAT THE PRIVATE DEED OF DONATION DATED APRIL 26, 1919 WAS NULL AND VOID."47 The issue of the validity of donation is likewise brought to Us by petitioners as they stated in their Memorandum 48 that one of the issues to be resolved is regarding the alleged fact that "THE HONORABLE COURT OF APPEALS ERRED IN FINDING THE DONATION INVALID." We are thus poised to inspect the deed of donation and to determine its validity.

We cannot agree with petitioners contention that respondents may no longer question the validity of the deed of donation on the ground that they already impliedly admitted it. Under the provisions of the Civil Code, a void contract is inexistent from the beginning. The right to set up the defense of its illegality cannot be waived. 49 The right to set up the nullity of a void or non-existent contract is not limited to the parties as in the case of annullable or voidable contracts; it is extended to third persons who are directly affected by the contract.50 Consequently, although respondents are not parties in the deed of donation, they can set up its nullity because they are directly affected by the same.51 The subject of the deed being the land they are occupying, its enforcement will definitely affect them. Petitioners cannot also use the finality of the RTC decision in Petition Case No. U-92052 as a shield against the verification of the validity of the deed of donation. According to petitioners, the said final decision is one for quieting of title.53 In other words, it is a case for declaratory relief under Rule 64 (now Rule 63) of the Rules of Court, which provides: SECTION 1. Who may file petition. Any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, or ordinance, may, before breach or violation thereof, bring an action to determine any question of construction or validity arising under the instrument or statute and for a declaration of his rights or duties thereunder. An action for the reformation of an instrument, to quiet title to real property or remove clouds therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought under this rule. SECTION 2. Parties. All persons shall be made parties who have or claim any interest which would be affected by the declaration; and no declaration shall, except as otherwise provided in these rules, prejudice the rights of persons not parties to the action. (Emphasis ours) However, respondents were not made parties in the said Petition Case No. U-920. Worse, instead of issuing summons to interested parties, the RTC merely allowed the posting of notices on the bulletin boards of Barangay Cabalitaan, Municipalities of Asingan and Lingayen, Pangasinan. As pointed out by the CA, citing the ruling of the RTC: x x x In the said case or Petition No. U-920, notices were posted on the bulletin boards of barangay Cabalitaan, Municipalities of Asingan and Lingayen, Pangasinan, so that there was a notice to the whole world and during the initial hearing and/or hearings, no one interposed objection thereto.54 Suits to quiet title are not technically suits in rem, nor are they, strictly speaking, in personam, but being against the person in respect of the res, these proceedings are characterized as quasi in rem. 55 The judgment in such proceedings is conclusive only between the parties.56 Thus, respondents are not bound by the decision in Petition Case No. U-920 as they were not made parties in the said case. The rules on quieting of title57 expressly provide that any declaration in a suit to quiet title shall not prejudice persons who are not parties to the action. That respondents filed a subsequent pleading58 in the same Petition Case No. U-920 after the decision there had become final did not change the fact that said decision became final without their being impleaded in the case. Said subsequent pleading was dismissed on the ground of finality of the decision.59 Thus, the RTC totally failed to give respondents their day in court. As a result, they cannot be bound by its orders. Generally accepted is the principle that no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by judgment rendered by the court.60 Moreover, for the principle of res judicata to apply, the following must be present: (1) a decision on the merits; (2) by a court of competent jurisdiction; (3) the decision is final; and (4) the two actions involve identical parties, subject matter and causes of action.61 The fourth element is not present in this case. The parties are not identical because respondents were not impleaded in Petition Case No. U-920. While the subject matter may be the same property covered by OCT No. 352, the causes of action are different. Petition Case No. U-920 is an action for declaratory relief while the case below is for recovery of property. We are not persuaded by petitioners posture that the only issue in this action for reconveyance is who has a better right over the land; and that the validity of the deed of donation is beside the point. 62 It is precisely the validity and enforceability of the deed of donation that is the determining factor in resolving the issue of who has a better right over the property. Moreover, notwithstanding procedural lapses as to the appropriateness of the remedies prayed for in the petition filed before Us, this Court can brush aside the technicalities in the interest of justice. In some instances, this Court even suspended its own rules and excepted a case from their operation whenever the higher interests of justice so demanded.63 Moreover, although respondents did not directly raise the issue of validity of the deed of donation at the commencement of the case before the trial court, it was stipulated64 by the parties during the pre-trial conference. In any event, this Court has

authority to inquire into any question necessary in arriving at a just decision of a case before it.65 Though not specifically questioned by the parties, additional issues may also be included, if deemed important for substantial justice to be rendered.66 Furthermore, this Court has held that although a factual issue is not squarely raised below, still in the interest of substantial justice, this Court is not prevented from considering a pivotal factual matter. The Supreme Court is clothed with ample authority to review palpable errors not assigned as such if it finds that their consideration is necessary in arriving at a just decision.67 A rudimentary doctrine on appealed cases is that this Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary at arriving at a just decision of the case.68 Also, an unassigned error closely related to an error properly assigned or upon which the determination of the question raised by the error properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as an error.69 Donation Propter Nuptias of Real Property Made in a Private Instrument Before the New Civil Code Took Effect on August 30, 1950 is Void We now focus on the crux of the petition, which is the validity of the deed of donation. It is settled that only laws existing at the time of the execution of a contract are applicable to it and not the later statutes, unless the latter are specifically intended to have retroactive effect.70 Accordingly, the Old Civil Code applies in this case as the donation propter nuptias was executed in 1919, while the New Civil Code took effect only on August 30, 1950. Under the Old Civil Code, donations propter nuptias must be made in a public instrument in which the property donated must be specifically described.71 Article 1328 of the Old Civil Code provides that gifts propter nuptias are governed by the rules established in Title 2 of Book 3 of the same Code. Article 633 of that title provides that the gift of real property, in order to be valid, must appear in a public document.72 It is settled that a donation of real estate propter nuptias is void unless made by public instrument.73 In the instant case, the donation propter nuptias did not become valid. Neither did it create any right because it was not made in a public instrument.74 Hence, it conveyed no title to the land in question to petitioners predecessors. Logically, then, the cancellation of OCT No. 352 and the issuance of a new TCT No. 44481 in favor of petitioners predecessors have no legal basis. The title to the subject property should, therefore, be restored to its original owners under OCT No. 352. Direct reconveyance to any of the parties is not possible as it has not yet been determined in a proper proceeding who among the heirs of spouses Simeon Doronio and Cornelia Gante is entitled to it. It is still unproven whether or not the parties are the only ones entitled to the properties of spouses Simeon Doronio and Cornelia Gante. As earlier intimated, there are still things to be done before the legal share of all the heirs can be properly adjudicated.75 Titled Property Cannot Be Acquired By Another By Adverse Possession or Extinctive Prescription Likewise, the claim of respondents that they became owners of the property by acquisitive prescription has no merit. Truth to tell, respondents cannot successfully invoke the argument of extinctive prescription. They cannot be deemed the owners by acquisitive prescription of the portion of the property they have been possessing. The reason is that the property was covered by OCT No. 352. A title once registered under the torrens system cannot be defeated even by adverse, open and notorious possession; neither can it be defeated by prescription.76 It is notice to the whole world and as such all persons are bound by it and no one can plead ignorance of the registration.77 The torrens system is intended to guarantee the integrity and conclusiveness of the certificate of registration, but it cannot be used for the perpetration of fraud against the real owner of the registered land. 78 The system merely confirms ownership and does not create it. Certainly, it cannot be used to divest the lawful owner of his title for the purpose of transferring it to another who has not acquired it by any of the modes allowed or recognized by law. It cannot be used to protect a usurper from the true owner, nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of another.79 Where such an illegal transfer is made, as in the case at bar, the law presumes that no registration has been made and so retains title in the real owner of the land.80

Although We confirm here the invalidity of the deed of donation and of its resulting TCT No. 44481, the controversy between the parties is yet to be fully settled. The issues as to who truly are the present owners of the property and what is the extent of their ownership remain unresolved. The same may be properly threshed out in the settlement of the estates of the registered owners of the property, namely: spouses Simeon Doronio and Cornelia Gante. WHEREFORE, the appealed Decision is REVERSED AND SET ASIDE. A new one is entered: (1) Declaring the private deed of donation propter nuptias in favor of petitioners predecessors NULL AND VOID; and (2) Ordering the Register of Deeds of Pangasinan to: (a) CANCEL Transfer Certificate of Title No. 44481 in the names of Marcelino Doronio and Veronica Pico; and (b) RESTORE Original Certificate of Title No. 352 in the names of its original owners, spouses Simeon Doronio and Cornelia Gante. SO ORDERED. G.R. No. 163663 June 30, 2006

GREATER METROPOLITAN MANILA SOLID WASTE MANAGEMENT COMMITTEE and the METROPOLITAN MANILA DEVELOPMENT AUTHORITY, Petitioners, vs. JANCOM ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA, Respondents. DECISION CARPIO MORALES, J.: The present petition for review on certiorari challenges the Decision1 dated December 19, 2003 and Resolution2 dated May 11, 2004 of the Court of Appeals (CA)3 in CA-G.R. SP No. 78752 which denied the petition for certiorari filed by herein petitioners Greater Metropolitan Manila Solid Waste Management Committee (GMMSWMC) and the Metropolitan Manila Development Authority (MMDA) and their Motion for Reconsideration, respectively. In 1994, Presidential Memorandum Order No. 202 was issued by then President Fidel V. Ramos creating an Executive Committee to oversee and develop waste-to-energy projects for the waste disposal sites in San Mateo, Rizal and Carmona, Cavite under the Build-Operate-Transfer (BOT) scheme. Respondent Jancom International Development Projects Pty. Limited of Australia (Jancom International) was one of the bidders for the San Mateo Waste Disposal Site. It subsequently entered into a partnership with Asea Brown Boveri under the firm name JANCOM Environmental Corporation (JANCOM), its co-respondent. On February 12, 1997, the above-said Executive Committee approved the recommendation of the Pre-qualification, Bids and Awards Committee to declare JANCOM as the sole complying bidder for the San Mateo Waste Disposal Site. On December 19, 1997, a Contract for the BOT Implementation of the Solid Waste Management Project for the San Mateo, Rizal Waste Disposal Site4 (the contract) was entered into by the Republic of the Philippines, represented by the Presidential Task Force on Solid Waste Management through then Department of Environment and Natural Resources Secretary Victor Ramos, then Cabinet Office for Regional Development-National Capital Region Chairman Dionisio dela Serna, and then MMDA Chairman Prospero Oreta on one hand, and JANCOM represented by its Chief Executive Officer Jorge Mora Aisa and its Chairman Jay Alparslan, on the other. On March 5, 1998, the contract was submitted for approval to President Ramos who subsequently endorsed it to then incoming President Joseph E. Estrada. Owing to the clamor of the residents of Rizal, the Estrada administration ordered the closure of the San Mateo landfill. Petitioner GMMSWMC thereupon adopted a Resolution not to pursue the contract with JANCOM, citing as reasons therefor the passage of Republic Act 8749, otherwise known as the Clean Air Act of 1999, the non-availability of the San Mateo site, and costly tipping fees.5 The Board of Directors of Jancom International thereafter adopted on January 4, 2000 a Resolution6 authorizing Atty. Manuel Molina to act as legal counsel for respondents and "determine and file such legal action as deemed necessary before the Philippine courts in any manner he may deem appropriate" against petitioners.

The Board of Directors of JANCOM also adopted a Resolution7 on February 7, 2000 granting Atty. Molina similar authorization to file legal action as may be necessary to protect its interest with respect to the contract. On March 14, 2000, respondents filed a petition for certiorari8 with the Regional Trial Court (RTC) of Pasig City where it was docketed as Special Civil Action No. 1955, to declare the GMMSWMC Resolution and the acts of the MMDA calling for bids for and authorizing the forging of a new contract for the Metro Manila waste management as illegal, unconstitutional and void and to enjoin petitioners from implementing the Resolution and making another award in lieu thereof. By Decision9 of May 29, 2000, Branch 68 of the Pasig City RTC found in favor of respondents.10 Petitioners thereupon assailed the RTC Decision via petition for certiorari11 with prayer for a temporary restraining order with the CA, docketed as CA-G.R. SP No. 59021. By Decision12 of November 13, 2000, the CA denied the petition for lack of merit and affirmed in toto the May 29, 2000 RTC Decision. Petitioners Motion for Reconsideration was denied, prompting them to file a petition for review before this Court, docketed as G.R. No. 147465. By Decision13 of January 30, 2002 and Resolution14 of April 10, 2002, this Court affirmed the November 13, 2001 CA Decision and declared the contract valid and perfected, albeitineffective and unimplementable pending approval by the President. JANCOM and the MMDA later purportedly entered into negotiations to modify certain provisions of the contract which were embodied in a draft Amended Agreement15 dated June 2002. The draft Amended Agreement bore no signature of the parties. Respondents, through Atty. Molina, subsequently filed before Branch 68 of the Pasig City RTC an Omnibus Motion 16 dated July 29, 2002 praying that: (1) an alias writ of execution be issued prohibiting and enjoining petitioners and their representatives from calling for, accepting, evaluating, approving, awarding, negotiating or implementing all bids, awards and contracts involving other Metro Manila waste management projects intended to be pursued or which are already being pursued; (2) the MMDA, through its Chairman Bayani F. Fernando, be directed to immediately forward and recommend the approval of the Amended Agreement to President Gloria Macapagal Arroyo; (3) Chairman Fernando be ordered to personally appear before the court and explain his acts and public pronouncements which are in direct violation and gross defiance of the final and executory May 29, 2000 RTC Decision; (4) the Executive Secretary and the Cabinet Secretaries of the departments-members of the National Solid Waste Management Commission be directed "to submit the contract within 30 days from notice to the President for signature and approval and if the latter chooses not to sign or approve the contract, the Executive Secretary be made to show cause therefor;" and (5) petitioners be directed to comply with and submit their written compliance with their obligations specifically directed under the provisions of Article 18, paragraphs 18.1, 18.1.1 (a), (b), (c) and (d) of the contract within 30 days from notice.17 To the Omnibus Motion petitioners filed their Opposition18 which merited JANCOMs Reply19 filed on August 19, 2002. On August 21, 2002, Atty. Simeon M. Magdamit, on behalf of Jancom International, filed before the RTC an Entry of Special Appearance and Manifestation with Motion to Reject the Pending Omnibus Motion 20 alleging that: (1) the Omnibus Motion was never approved by Jancom International; (2) the Omnibus Motion was initiated by lawyers whose services had already been terminated, hence, were unauthorized to represent it; and (3) the agreed judicial venue for dispute resolution relative to the implementation of the contract is the International Court of Arbitration in the United Kingdom pursuant to Article 16.121 of said contract. In the meantime, on November 3, 2002, the MMDA forwarded the contract to the Office of the President for appropriate action,22 together with MMDA Resolution No. 02-1823 dated June 26, 2002, "Recommending to her Excellency the President of the Republic of the Philippines to Disapprove the Contract Entered Into by the Executive Committee of the Presidential Task Force on Waste Management with Jancom Environmental Corporation and for Other Purposes." By Order24 of November 18, 2002, the RTC noted the above-stated Entry of Special Appearance of Atty. Magdamit for Jancom International and denied the Motion to Reject Pending Omnibus Motion for lack of merit. Jancom International filed on December 9, 2002 a Motion for Reconsideration25 which was denied for lack of merit by Order26 of January 8, 2003. Petitioners and respondents then filed their Memoranda27 on May 23, 2003 and May 26, 2003, respectively. By Order28 of June 11, 2003, the RTC granted respondents Omnibus Motion in part. The dispositive portion of the Order reads, quoted verbatim: WHEREFORE, in view of the foregoing, let an Alias Writ of Execution immediately issue and the Clerk of Court and Ex-Oficio Sheriff or any o[f] her Deputies is directed to implement the same within sixty (60) days from receipt thereof. Thus, any and all such bids or contracts entered into by respondent MMDA with third parties covering the waste disposal and management within the Metro Manila after August 14, 2000 are hereby declared NULL and VOID. Respondents are henceforth enjoined and prohibited, with a stern warning, from entering into any such contract with any third party whether directly or

indirectly, in violation of the contractual rights of petitioner JANCOM under the BOT Contract Award, consistent with the Supreme Courts Decision of January 30, 2002. Respondent MMDA is hereby directed to SUBMIT the Amended Agreement concluded by petitioners with the previous MMDA officials, or in its discretion if it finds [it] more advantageous to the government, to require petitioners to make adjustments in the Contract in accordance with existing environmental laws and other relevant concerns, and thereafter forward the Amended Agreement for signature and approval by the President of the Philippines. The concerned respondents are hereby further directed to comply fully and in good faith with its institutional obligations or undertakings as provided in Article 18 of the BOT Contract. Let a copy of this Order be furnished the Office of the Clerk of Court and the Commission on Audit for its information and guidance. SO ORDERED.29 (Emphasis in the original) G.R. No. L-59311 January 31, 1985 RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner, vs. HON. JAIME M. LANTIN, THE SHERIFF OF THE COURT OF FIRST INSTANCE OF QUEZON CITY and RUFUS B. RODRIGUEZ, respondents. G.R. No. L-59320 January 31, 1985 GLOBE MACKAY CABLE AND RADIO CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS, HON. JAIME M. LANTIN, THE SHERIFF OF THE COURT OF FIRST INSTANCE OF QUEZON CITY, AND RUFUS B. RODRIGUEZ, respondents.

GUTIERREZ, JR., J.: In these interrelated petitions for review on certiorari, the Radio Communications of the Philippines, Inc. (RCPI) and Globe Mackay Cable and Radio/Corporation (GLOBE) question the decision of the Court of Appeals, now Intermediate Appellate Court, which refused to set aside the orders of the Court of First Instance of Rizal directing execution pending appeal of an award of P213,148.00 damages in favor of private respondent Rufus B. Rodriguez. On September 8, 1978, Rufus B. Rodriguez, as President of the World Association of Law Students (WALS), sent two cablegrams overseas through RCPI, one addressed to Mohammed Elsir Taha in Khartoum, Sudan Socialist Union, and the other to Diane Merger in Athens, Georgia, United States. The cablegrams were, in turn, relayed to GLOBE for transmission to their foreign destinations. The telegram to Taha advised him of Rodriguez's pending arrival in Khartoum on September 18, 1978, while the telegram to Merger advised her of the scheduled WALS conference in Khartoum. Rodriguez left the Philippines on September 15, 1978. On September 18, 1978, he arrived in Khartoum, Sudan at 9:30 in the evening. Nobody was at the airport to meet him. Due to the lateness of the hour, he was forced to sleep at the airport. He lined up five (5) chairs together and lay down with his luggages near him. Because of the non-receipt of the cablegram, Taha was not able to meet him. Worse all preparations for the international conference had to be cancelled. Furthermore, Fernando Barros, the VicePresident, arrived the next day from Chile, followed by the other officers from other countries except Diane Merger, the organization's secretary. It turned out that the wire sent by Rodriguez to Merger was delivered to the address on the message but the person who delivered it was told that the addressee was no longer staying there. This fact was not accordingly reported to Rodriguez in Metro Manila. The undelivered cablegram was not returned by the correspondent abroad to Globe for disposition in the Philippines, On December 8, 1978, Rodriguez filed a complaint for compensatory damages in the amount of P45,147.00, moral damages in the amount of P250,000.00,' and exemplary damages in the amount of P50,000.00 against RCPI and GLOBE. On March 17, 1980, the then Presiding Judge Lino L. Aover of the Court of First Instance of Rizal rendered a decision, the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally to pay the plaintiff the total sum of TWO HUNDRED THIRTEEN THOUSAND ONE HUNDRED FORTY EIGHT PESOS (P213,148.00) by way of damages and to pay the costs of this suit. The above amount is broken down as follows by the trial court:

Moral damages consequent to the humiliation and embarrassment that the plaintiff suffered under the two causes of action in the amount of P100,000.00 are adequate. Exemplary damages under both counts are fixed reasonably at P50,000.00. On the actual damages, the court accepts plaintiff's expenses for the preparation of the trip at P10,000.00; plane fare at P20,000.00; stay in transit in Pakistan at P5,000.00; his hotel bills in Khartoum at P4,000.00; his meals in Khartoum at P4,000.00 and the telegraphic toll at P78.00. The court refuses the sum spent for the dinner that he allegedly tendered as not established by sufficient proof. With respect to the telegram sent to Diane Merger, the court finds that the actual damages amount to P70.00 representing the cost of the cablegram. As for attorney's fees, the court finds that the amount of P20,000.00 including litigation of expenses are reasonable. On May 26, 1980, Rodriguez filed a "Motion for Execution Before Expiration of Time to Appeal" relying on Rule 39, Section 2 of the Revised Rules of Court alleging that the appeal is clearly dilatory and that the lapse of time would make the ultimate judgment illusory and ineffective. An opposition to the motion was filed by RCPI on June 3, 1980 and by GLOBE on November 18,1980. On January 21, 1981, the respondent court of first instance granted the said motion in an order which reads as follows: Upon consideration of the Motion for execution pending appeal, the opposition thereto and the arguments in open court by the parties, and finding that: a) the appeal was for the purpose of delay, there being breach of contract, and defendants' evidence being weak or feeble; b) plaintiff is willing to put up a bond in the amount of P213,148.00 to answer for damages if the decision is reversed on appeal the Court grants the motion. Let writ of execution pending appeal be issued upon the filing of a bond by plaintiff in the sum of P213,148.00. Said bond should be filed within ten (10) days from receipt of this order. On February 5, 1981, the same court issued another order which reads as follows: The bond pursuant to the order of January 21, 1981, is approved. Let writ of execution of judgment pending appeal be issued forthwith. On February 10, 1981, GLOBE filed a motion for reconsideration of the above order and expressed its desire to put up a supersedeas bond to stay immediate execution. This motion was denied in an order dated February 17, 1981. Even before the issuance of this order denying petitioner's motion for reconsideration, the respondent Sheriff, on February 13, 1981, insisted on levying on the funds and assets of petitioners RCPI and GLOBE, prompting them to file an "Urgent Motion to Recall Writ of Execution. This urgent motion was likewise denied. On February 17, 1981, RCPI and GLOBE filed with the Court of Appeals a petition for certiorari, mandamus, and prohibition with a prayer for the issuance of a writ of preliminary injunction. On February 20, 1981, the Court of Appeals issued a restraining order enjoining the lower court from further proceeding with the civil case and from enforcing the writ of execution until further orders. On November 10, 1981, the Court of Appeals rendered a decision. The dispositive portion reads as follows: WHEREFORE, the herein petition is hereby dismissed for lack of merit and the questioned orders of January 21, 1981, February 5, 1981 and February 20, 1981 are hereby declared valid and legal. Consequently, the restraining order issued earlier on February 2, 1981 is hereby lifted. With costs against the petitioners. Within fifteen (15) days from receipt of the abovequoted decision, the petitioners filed with the respondent Court of Appeals a motion for reconsideration. On December 28, 1981, petitioners received a resolution of the Court of Appeals denying their motion for reconsideration. On January 18, 1982, this petition entitled appeal by certiorari was filed. The petitioners' arguments revolve around the alleged grave abuse of discretion committed by the Court of Appeals when it declined to disturb the judgment of the trial court on the issuance of the writ of execution pending appeal. Section 2, Rule 39 of the Revised Rules of Court provides:

On motion of the prevailing party with notice to the adverse party the court may, in its discretion, order execution to issue even before the expiration of the time to appeal, upon good reasons to be stated in a special order. If a record on appeal is filed thereafter, the motion and the special order shall be included therein. The rule specifically vests the court with the exercise of discretionary power. The requisites for the court's valid exercise of the discretion to order execution pending appeal are: (1) there must be a motion by the prevailing party with notice to the adverse party; (2) there must be good reasons for issuing the execution, and (3) the good reasons must be stated in a special order. Considering the nature of the wrongful acts found by the trial court and the amount of damages adjudicated as recoverable, both of which are stated in detail in the decisions and various orders of the trial court and the appellate court, we are constrained to sustain the respondent courts insofar as the award for actual or compensatory damages are concerned but to postpone the execution of the awards for moral and exemplary damages until such time as the merits of the cases now on regular appeal before the Court of Appeals are finally determined. The execution of any award for moral and exemplary damages is dependent on the outcome of the main case. Unlike actual damages for which the petitioners may clearly be held liable if they breach a specific contract and the amounts of which are fixed and certain, liabilities with respect to moral and exemplary damages as wen as the exact amounts remain uncertain and indefinite pending resolution by the Intermediate Appellate Court and eventually the Supreme Court. The existence of the factual bases of these types of damages and their causal relation to the petitioners' act will have to be determined in the light of the assignments of errors on appeal. It is possible that the petitioners, after all, while liable for actual damages may not be liable for moral and exemplary damages. Or as in some cases elevated to the Supreme Court, the awards may be reduced. (See Radio Communications of the Philippines, Inc. v. Intermediate Appellate Court, et al., G.R. No. 67034, December 3, 1984) In its questioned decision, the Court of Appeals acknowledged the nature of execution pending appeal as an exceptional remedy which must be interpreted restrictively, citing the many ruling cases on this point. At the same time, what was before the appellate court was not the application of a general rule but the exception thereto, the special reasons or circumstances warranting execution pending appeal. The Court of Appeals quoted with approval the trial court's findings: xxx xxx xxx 2. Execution pending appeal is discretionary. Execution pending appeal is a matter of sound discretion on the part of the trial court. (National Marketing Corporation v. Tan, L- 17768, March 31, 1962; Ong Sit v. Piccio, 78 Phil. 232; Go Changjo v. Roldan Sy Changjo, 18 Phil. 405). The appellate court will not interfere, control or inquire into the exercise of this discretion, unless it is shown that there has been an abuse thereof. Asturias v. Victoriano, 98 Phil. 581; Naredo v. Yatco, 80 Phil. 220;Federal Fils Inc. v. Ocampo, 78 Phil. 479; Ong Sit v. Piccio supra; Buenaventura v. Pea 78 Phil. 798;Presbitero v. Rodas, 73 Phil. 300; Iloilo Trading and Exchange v. Rodas, 73 Phil. 327; Hacienda Navarro, Inc. v. Labrador, 65 Phil. 536; Lusk v. Stevens, 64 Phil. 154; Gamay v. Gutierrez David, 48 Phil. 768; Gutierrez Hermanos v. Orias Hermanos & Co., 39 Phil. 92; Case v. Metropole Hotel, 5 Phil. 49; Macke v. Camps, 5 Phil. 185; Calvo v. De Gutierrez, 4 Phil. 203) 3. Requirement of good reasons. The requirement that execution pending appeal must be supported by good reasons, to be stated in a special order, should be complied with because the existence of good reasons is the element that gives validity to an order of execution (Alcasid v. Samson, 102 Phil. 735; De la Rosa v. City of Baguio, 90 Phil. 720) (sic) Unless the reasons are made known it would be difficult to determine whether judicial discretion has been properly exercised in the case (Asturias v. Victoriano, supra If the discretionary power of the court is to have any meaning, the sufficiency of the reasons for ordering such execution is naturally to be determined by the court. (Buenaventura v. Pea, supra; Lusk v. Stevens, supra.) Whether the reasons are so urgent and compelling as to justify execution pending appeal depends upon the circumstances of the case. The filing of a bond by the prevailing party, as required by the court in its order of execution, constitutes good reason for the issuance of a writ of execution mending appeal (Rodriguez v. Court of Appeals, L-12554, May 23, 1959; Hacienda Navarro, Inc. v. Labrador,supra; People's Bank & Trust Co. v. San Jose, 96 Phil. 895). The court likewise noted that the questioned order made reference to the reasons averred in the motion which appeared to it to be good and which it found to be sufficient compliance with the law (Joven v. Boncan, 67 Phil. 252). It noted the finding of the trial court that the appeal interposed by the petitioners was not based on strong grounds, which finding is again a good reason for execution pending appeal. (Presbitero v. Rodas, 73 Phil. 300; Iloilo Trading Center and Exchange v. Rodas, 78 Phil. 789) The petitioners pit their arguments against the conclusions of the Court of Appeals and the Court of First Instance on the special nature of the circumstances warranting the exercise of discretionary power, the weak defenses at trial and weak reasons on appeal, and the nature of the evidence upon which the decision is based. Insofar as actual and compensatory damages are concerned, we find insufficient cause to restrain the exercise of discretionary power. The petitioners question the findings of the Court of Appeals that:

The respondent court had to look back at the sworn complaint that, the private respondent in the aforesaid complaint had to sleep at the airport left alone to himself throughout the night with nobody to talk to because in Khartoum, Sudan, only a few people if at all, could speak English and because our country has no consulate in the said place, language barrier was a big problem in looking for a taxicab to the hotel. To repeat, he had to sleep on the 5 chairs put together; he is a respectable man in the country who had to go to Khartoum as President of the World Association of Law Students in the Philippines and had to make the trip to Sudan for a conference; that he was a third year law student of the College of Law in the University of the Philippines and the Cagayan de Oro Sangguniang Panglunsod City where he is from, even passed a Resolution congratulating him for having been chosen or selected the President of the World Association of Law Students or WALS, invited by the Sudanese government for the conference on September 18, 1978: arriving at the airport at 9:30 in the evening; as he could not talk in Arabic, he was left alone to himself to repeat until he had to wait for the next morning to have somebody to translate in Arabic language how to find the place of Mohammed Elsir Taha who invited him as per telegrams exchanged between him and the plaintiff, now private respondent that the latter's residence was found to be 20 kilometers away (Office of the Secretary of the African Youth Committee, Sudan Socialist Union); that because the telegram sent by him in Manila, Philippines on September 8, 1978 was not delivered to Mohammed Taha, the latter was not able to meet him at the airport; on the other hand, the telegram sent to Diane Merger as Secretary of the conference committee having been delivered to the address given by him but the person who delivered was told that the said addressee was no longer staying there and moved out a year ago but this fact was not informed/reported accordingly to him in Metro Manila, Philippines where the cablegram was sent and which cablegram was not returned by the receiver abroad to Globe for disposition in the Philippines. Evidently, there was a breach of contractual obligation committed against him by the defendants, now private respondent Globe Mackay and RCPI, and therefore, he is entitled to such damages which he has claimed for the humiliation, suffering, mental anguish and besmirched reputation as a result of the non-delivery of the cables, which damages amounted to P213,148.00. The merits of the main case are not to be determined in a petition questioning execution pending appeal (City of Manila v. Court of Appeals, 72 SCRA 98). However, the facts and circumstances clearly brought out during trial cannot help but influence whether or not an appeal appears to be dilatory and whether or not there are sufficient reasons including considerations of justice and equity to justify a departure from the regular procedures regarding execution. Petitioners question the alleged presence of superior circumstances demanding urgency of execution pending appeal. Any delay in final adjudication on the merits will be the fault of the courts and not theirs, according to them. Petitioner GLOBE states: In the light of the peculiar circumstances obtaining in the case at bar, among which are that: 1. The judgment creditor does not even have a cause of action against herein petitioner; 2. The greater portion of the amount awarded in the judgment of the trial court cannot be legally given; and 3. Herein petitioner's defenses are legal and valid and the evidence submitted to prove them, positive and convincing. any bond which the prevailing party might have posted cannot fully compensate for the inconvenience and damages which petitioner will suffer by reason of such hasty execution for the reason that the said execution will be morally, legally, equitably and outrageously incorrect. ... The respondent introduced evidence to show that he suffered mental anguish, serious anxiety, besmirched reputation, wounded feelings, and social humiliation. The petitioners question the extent of these sufferings and further aver that their acts claimed to have caused the injury were not wrongful, deliberate, wanton, and tainted with bad faith or fraud. Our review of the records constrains us to allow execution pending appeal of actual but not the moral and exemplary damages which must await the final determination of the main cases. WHEREFORE, the petition is GRANTED PARTIAL DUE COURSE. The November 10, 1981 decision and December 22, 1981 resolution of the appellate court are SET ASIDE and a new ORDER is ENTERED authorizing execution pending appeal of P43,148.00 actual damages upon the private respondent's filing of a bond in the same amount. The execution of any award for moral damages, exemplary damages, and attorney's fees is enjoined until after final resolution of the issues in the main case. SO ORDERED. Teehankee, Actg. CJ., Melencio-Herrera, Plana, Relova, and De la Fuente, JJ., concur.

Alampay, J., took no part. G.R. No. L-60887 November 13, 1991 PERLA COMPANIA DE SEGUROS, INC., petitioner, vs. HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES, HONORATO BORBON, SR., OFFICE OF THE PROVINCIAL SHERIFF, PROVINCE OF CEBU, respondents. Hector L. Fernandez for petitioner. Domingo Quibranza and Vicente A. Quibranza for private respondents.

FELICIANO, J.:p The present Petition for Certiorari seeks to annul: (a) the Order dated 6 August 1979 1 which ordered the Provincial Sheriff to garnish the third-party liability insurance policy issued by petitioner Perla Compania de Seguros, Inc. ("Perla") in favor of Nelia Enriquez, judgment debtor in Civil Case No. R-15391; (b) the Order dated 24 October 1979 2 which denied the motion for reconsideration of the 6 August 1979 Order; and (c) the Order dated 8 April 1980 3 which ordered the issuance of an alias writ of garnishment against petitioner. In the afternoon of 1 June 1976, a Cimarron PUJ owned and registered in the name of Nelia Enriquez, and driven by Cosme Casas, was travelling from Cebu City to Danao City. While passing through Liloan, Cebu, the Cimarron PUJ collided with a private jeep owned by the late Calixto Palmes (husband of private respondent Primitiva Palmes) who was then driving the private jeep. The impact of the collision was such that the private jeep was flung away to a distance of about thirty (30) feet and then fell on its right side pinning down Calixto Palmes. He died as a result of cardio-respiratory arrest due to a crushed chest. 4 The accident also caused physical injuries on the part of Adeudatus Borbon who was then only two (2) years old. On 25 June 1976, private respondents Primitiva Palmes (widow of Calixto Palmes) and Honorato Borbon, Sr. (father of minor Adeudatus Borbon) filed a complaint 5 against Cosme Casas and Nelia Enriquez (assisted by her husband Leonardo Enriquez) before the then Court of First Instance of Cebu, Branch 3, claiming actual, moral, nominal and exemplary damages as a result of the accident. The claim of private respondent Honorato Borbon, Sr., being distinct and separate from that of co-plaintiff Primitiva Palmes, and the amount thereof falling properly within the jurisdiction of the inferior court, respondent Judge Jose R. Ramolete ordered the Borbon claim excluded from the complaint, without prejudice to its being filed with the proper inferior court. On 4 April 1977, the Court of First Instance rendered a Decision 6 in favor of private respondent Primitiva Palmes, ordering common carrier Nelia Enriquez to pay her P10,000.00 as moral damages, P12,000.00 as compensatory damages for the death of Calixto Palmes, P3,000.00 as exemplary damages, P5,000.00 as actual damages, and P1,000.00 as attorney's fees. The judgment of the trial court became final and executory and a writ of execution was thereafter issued. The writ of execution was, however, returned unsatisfied. Consequently, the judgment debtor Nelia Enriquez was summoned before the trial court for examination on 23 July 1979. She declared under oath that the Cimarron PUJ registered in her name was covered by a third-party liability insurance policy issued by petitioner Perla. Thus, on 31 July 1979, private respondent Palmes filed a motion for garnishment 7 praying that an order of garnishment be issued against the insurance policy issued by petitioner in favor of the judgment debtor. On 6 August 1979, respondent Judge issued an Order 8 directing the Provincial Sheriff or his deputy to garnish the third-party liability insurance policy. Petitioner then appeared before the trial court and moved for reconsideration of the 6 August 1979 Order and for quashal of the writ of garnishment, 9 alleging that the writ was void on the ground that it (Perla) was not a party to the case and that jurisdiction over its person had never been acquired by the trial court by service of summons or by any process. The trial court denied petitioner's motion.10 An Order for issuance of an alias writ of garnishment was subsequently issued on 8 April 1980. 11 More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this Court on 25 June 1982 alleging grave abuse of discretion on the part of respondent Judge Ramolete in ordering garnishment of the third-party liability insurance contract issued by petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The Petition should have been dismissed forthwith for having been filed way out of time but, for reasons which do not appear on the record, was nonetheless entertained. In this Petition, petitioner Perla reiterates its contention that its insurance contract cannot be subjected to garnishment or execution to satisfy the judgment in Civil Case No. R-15391 because petitioner was not a party to the case and the trial court

did not acquire jurisdiction over petitioner's person. Perla further argues that the writ of garnishment had been issued solely on the basis of the testimony of the judgment debtor during the examination on 23 July 1979 to the effect that the Cimarron PUJ was covered by a third-party liability insurance issued by Perla, without granting it the opportunity to set up any defenses which it may have under the insurance contract; and that the proceedings taken against petitioner are contrary to the procedure laid down in Economic Insurance Company, Inc. v. Torres, et al., 12 which held that under Rule 39, Section 45, the Court "may only authorize" the judgment creditor to institute an action against a third person who holds property belonging to the judgment debtor. We find no grave abuse of discretion or act in excess of or without jurisdiction on the part of respondent Judge Ramolete in ordering the garnishment of the judgment debtor's third-party liability insurance. Garnishment has been defined as a species of attachment for reaching any property or credits pertaining or payable to a judgment debtor. 13 In legal contemplation, it is a forced novation by the substitution of creditors: 14the judgment debtor, who is the original creditor of the garnishee is, through service of the writ of garnishment, substituted by the judgment creditor who thereby becomes creditor of the garnishee. Garnishment has also been described as a warning to a person having in his possession property or credits of the judgment debtor, not to pay the money or deliver the property to the latter, but rather to appear and answer the plaintiff's suit. 15 In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is not necessary that summons be served upon him. The garnishee need not be impleaded as a party to the case. All that is necessary for the trial court lawfully to bind the person of the garnishee or any person who has in his possession credits belonging to the judgment debtor is service upon him of the writ of garnishment. The Rules of Court themselves do not require that the garnishee be served with summons or impleaded in the case in order to make him liable. Rule 39, Section 15 provides: Sec. 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real or personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution . . . Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied on in like manner and with like effect as under a writ of attachment. (Emphasis supplied). Rule 57, Section 7(e) in turn reads: Sec. 7. Attachment of real and personal property; recording thereof. Properties shall be attached by the officer executing the order in the following manner: xxx xxx xxx (e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the person owing such debts, or having his possession or under his control such credits or other personal property, or with his agent, a copy of the order, and notice that the debts owing by him to the party against whom attachment is issued, and the credits and other personal property in his possession, or under his control, belonging to said party, are attached in pursuance of such order; xxx xxx xxx (Emphasis supplied) Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to compliance with all orders and processes of the trial court with a view to the complete satisfaction of the judgment of the court. In Bautista v. Barredo, 16 the Court, through Mr. Justice Bautista Angelo, held: While it is true that defendant Jose M. Barredo was not a party in Civil Case No. 1636 when it was instituted by appellant against the Philippine Ready Mix Concrete Company, Inc., however, jurisdiction was acquired over him by the court and he became a virtual party to the case when, after final judgment was rendered in said case against the company, the sheriff served upon him a writ of garnishment in behalf of appellant. Thus, as held by this Court in the case of Tayabas Land Company vs. Sharruf, 41 Phil. 382, the proceeding by garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. By means of the citation, the stranger becomes a forced intervenor; and the court, having acquired jurisdiction over him by means of the citation, requires him to pay

his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. (Emphasis supplied). In Rizal Commercial Banking Corporation v. De Castro, 17 the Court stressed that the asset or credit garnished is thereupon subjected to a specific lien: The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis, under the sole control of such court. 18 (Emphasis supplied) In the present case, there can be no doubt, therefore, that the trial court actually acquired jurisdiction over petitioner Perla when it was served with the writ of garnishment of the third-party liability insurance policy it had issued in favor of judgment debtor Nelia Enriquez. Perla cannot successfully evade liability thereon by such a contention. Every interest which the judgment debtor may have in property may be subjected to execution.19 In the instant case, the judgment debtor Nelia Enriquez clearly had an interest in the proceeds of the third-party liability insurance contract. In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party to whom the insured is liable. 20 The insurer becomes liable as soon as the liability of the insured to the injured third person attaches. Prior payment by the insured to the injured third person is not necessary in order that the obligation of the insurer may arise. From the moment that the insured became liable to the third person, the insured acquired an interest in the insurance contract, which interest may be garnished like any other credit. 21 Petitioner also contends that in order that it may be held liable under the third-party liability insurance, a separate action should have been commenced by private respondents to establish petitioner's liability. Petitioner invokesEconomic Insurance Company, Inc. vs. Torres, 22 which stated: It is clear from Section 45, Rule 39 that if a persons alleged to have property of the judgment debtor or to be indebted to him claims an interest in the property adverse to him or denies the debt, the court may only authorize the judgment creditor to institute an action against such person for the recovery of such interest or debt. Said section does not authorize the court to make a finding that the third person has in his possession property belonging to the judgment debtor or is indebted to him and to order said third person to pay the amount to the judgment creditor. It has been held that the only power of the court in proceedings supplemental to execution is to niake an order authorizing the creditor to sue in the proper court to recover an indebtedness due to the judgment debtor. The court has no jurisdiction to try summarily the question whether the third party served with notice of execution and levy is indebted to defendant when such indebtedness is denied. To make an order in relation to property which the garnishee claimed to own in his own right, requiring its application in satisfaction of judgment of another, would be to deprive the garnishee of property upon summary proceeding and without due process of law. (Emphasis supplied) But reliance by petitioner on the case of Economic Insurance Company, Inc. v. Torres (supra) is misplaced. The Court there held that a separate action needs to be commenced when the garnishee "claims an interest in the property adverse to him (judgment debtor) or denies the debt." In the instant case, petitioner Perla did not deny before the trial court that it had indeed issued a third-party liability insurance policy in favor of the judgment debtor. Petitioner moreover refrained from setting up any substantive defense which it might have against the insured-judgment debtor. The only ground asserted by petitioner in its "Motion for Reconsideration of the Order dated August 6, 1979 and to Quash Notice of Garnishment" was lack of jurisdiction of the trial court for failure to implead it in the case by serving it with summons. Accordingly, Rule 39, Section 45 of the Rules of Court is not applicable in the instant case, and we see no need to require a separate action against Perla: a writ of garnishment suffices to hold petitioner answerable to the judgment creditor. If Perla had any substantive defenses against the judgment debtor, it is properly deemed to have waived them by laches. WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED for having been filed out of time and for lack of merit. The assailed Orders of the trial court are hereby AFFIRMED. Costs against petitioner. This Decision is immediately executory. SO ORDERED. BABY ARLENE LARANO,* Petitioner, Present: G.R. No. 158231

YNARES-SANTIAGO, J.,

- versus -

Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA, JJ.

SPS. ALFREDO CALENDACION and RAFAELA T. CALENDACION,** Respondents. Promulgated: June 19, 2007

x--------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision[1] dated May 13, 2003 of the Court of Appeals (CA) in CA-G.R. SP No. 68272 which dismissed the complaint for unlawful detainer of Baby Arlene Larao (petitioner) against Spouses Alfredo and Rafaela Calendacion(respondents).

The factual background of the case is as follows: Petitioner owns a parcel of riceland situated in Barangay Daniw, Municipality of Victoria, Laguna covered by TCT No. 175241 of the Register of Deeds of Laguna. On September 14, 1998, petitioner and respondents executed a Contract to Sell whereby the latter agreed to buy a 50,000-square meter portion of petitioner's riceland for P5Million, with P500,000.00 as down payment and the balance payable in nine installments of P500,000.00 each, until September 2001.[2]

Pending full payment of the purchase price, possession of the riceland was transferred to respondents under the condition that they shall account for and deliver the harvest from said riceland to petitioner. Respondents, however, failed to pay the installments and to account for and deliver the harvest from said riceland.[3]

On March 7, 2000, petitioner sent respondents a demand letter[4] to vacate the riceland within 10 days from receipt thereof, but as her demand went unheeded, she filed on April 5, 2000 a Complaint[5] against respondents for unlawful detainer before the Municipal Trial Court (MTC), Victoria, Laguna, docketed as Civil Case No. 826, praying that respondents be directed to vacate the riceland and to pay P400,000.00 per year from September 1998 until they vacate, as reasonable compensation for the use of the property,P120,000.00 as attorneys fees, and P50,000.00 as litigation expenses.
[6]

In their Answer[7] dated April 26, 2000, respondents admit the execution of the Contract to Sell but deny that it contains all the agreements of the parties. They allege that petitioner has no cause of action against them because the three-year period within which to pay the purchase price has not yet lapsed; that the MTC has no jurisdiction over the case because the complaint failed to allege that a demand to pay and to vacate the riceland was made upon them.[8]

On August 2, 2001, the MTC rendered a Decision,[9] the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering defendants, as follows:

1.) To immediately vacate the premises in question;

2.) To pay the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as a reasonable compensation for the use and occupation of the property;

3.) To pay TWENTY THOUSAND (P20,000.00) PESOS for and attorney's fees; and

4.) To pay FIVE THOUSAND (P5,000.00) PESOS as litigation expenses, plus costs.

SO ORDERED.[10]

Respondents filed an appeal with the Regional Trial Court (RTC), Branch 26, Sta. Cruz, Laguna, docketed as Civil Case No. SC-4141.[11] On December 3, 2001, the RTC rendered a Decision,[12] the dispositive portion of which reads:

WHEREFORE, the judgment of the trial court is hereby affirmed subject to the modification that defendants are ordered to pay plaintiff the amount of FOUR HUNDRED THOUSAND (P400,000.00), as yearly reasonable compensation for the use and occupation of said riceland computed from 1999 until such time that defendants have actually vacated the same.

SO ORDERED.[13]

Undaunted, respondents filed a Petition for Review with the CA. [14] For failure to file her comment despite receipt of CA Resolution[15] dated May 8, 2002 which required her to file a comment, petitioner was deemed to have waived her right to file comment to the petition in CA Resolution dated August 28, 2002.[16]

On May 13, 2003, the CA rendered a Decision[17] setting aside the Decision of the RTC and dismissing the complaint for unlawful detainer. The CA nullified the proceedings before the MTC for want of jurisdiction. It held that the issues in the case - whether or not there was a violation of the Contract to Sell, whether or not such violation gives the petitioner the right to terminate the contract and consequently, the right to recover possession and the value of the harvest from the riceland extend beyond those commonly involved in unlawful detainer suits where only the issue of possession is involved; that the case is not a mere detainer suit but one incapable of pecuniary estimation, placing it under the exclusive original jurisdiction of the RTC, not the MTC.

Dissatisfied, petitioner filed the present petition anchored on the following grounds:

1. The respondent Court of Appeals committed grave error in giving due course to the private respondents' petition for review notwithstanding the fact that said petition contains no verification to the effect that the allegations therein were read and understood by the private respondents and that they are true and correct of their own or personal knowledge or based on authentic records, as required by the rules.

2. The respondent Court of Appeals grievously erred in dismissing the case on the ground that the Municipal Trial Court has no jurisdiction over the case for unlawful detainer, and thus the Regional Trial Court likewise has no jurisdiction on appeal to decide the case for unlawful detainer, which allegedly involves a matter incapable of pecuniary estimation.

3. The respondent Court of Appeals erred in not affirming the decision of the Regional Trial Court dated December 3, 2001, modifying the decision of the Municipal Trial Court dated August 2, 2000 both ordering the eviction of private respondents from the subject property and payment of the reasonable value of the use of the subject premises.[18]

Petitioner contends that the CA should have dismissed outright the petition for review filed before it since it contains no verification as required by the Rules; and that the CA, in finding that the complaint before the MTC was not one for unlawful detainer but for specific performance, did not limit itself to the allegations in the complaint but resorted to unrestrained references, deductions and/or conjectures, unduly influenced by the allegations in the answer.

Respondents, on the other hand, contend that verification is just a formal requirement; that petitioner waived her right to question the defect when she failed to submit her comment; that the CA correctly pointed out that the present case involves one that is incapable of pecuniary estimation since the crux of the matter is the rights of the parties based on the Contract to Sell.

The petition is bereft of merit.

As to the contention of petitioner that the CA should not have taken cognizance of the petition for review because it was not verified, as required by the Rules, this Court has held in a number of instances that such a deficiency can be excused or dispensed with in meritorious cases, the defect being neither jurisdictional nor always fatal. [19] The requirement regarding verification of a pleading is formal.[20] Such requirement is simply a condition affecting the form of pleading, the noncompliance with which does not necessarily render the pleading fatally defective. [21] Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith.[22] The court may order the correction of the pleading if verification is lacking or act on the pleading although it is not verified, if the attending circumstances are such that strict compliance with the Rules may be dispensed with in order that the ends of justice may thereby be served.[23]

Besides, petitioner did not raise the issue of lack of verification before the CA. She did not file a comment to the petition and it is too late in the day to assail such defect, as she is deemed to have waived any objection to the formal flaws of the petition. Points of law, theories, issues and arguments not brought to the attention of the lower court cannot be raised for the first time on appeal.[24]

The main issue being raised in the present petition is whether the complaint is one for unlawful detainer.

Settled is the rule that jurisdiction in ejectment cases is determined by the allegations pleaded in the complaint. [25] It cannot be made to depend upon the defenses set up in the answer or pleadings filed by the defendant. [26] Neither can it be made to depend on the exclusive characterization of the case by one of the parties. [27] The test for determining the sufficiency of those allegations is whether, admitting the facts alleged, the court can render a valid judgment in accordance with the prayer of the plaintiff.[28]

The facts upon which an action for unlawful detainer can be brought are specially mentioned in Section 1, Rule 70 of the Revised Rules of Court, which provides: Section 1. Who may institute proceedings, and when. Subject to the provisions of the next succeeding section, a person deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract, express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee or other person may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such possession, together with damages and costs. (Emphasis supplied)

In unlawful detainer, the possession was originally lawful but became unlawful by the expiration or termination of the right to possess; hence, the issue of rightful possession is decisive for, in such action, the defendant is in actual possession and the plaintiffs cause of action is the termination of the defendants right to continue in possession.[29]

Applied to the present case, petitioner, as vendor, must comply with two requisites for the purpose of bringing an ejectment suit: (a) there must be failure to pay the installment due or comply with the conditions of the Contract to Sell; and (b) there must be demand both to pay or to comply and vacate within the periods specified in Section 2 [30] of Rule 70, namely: 15 days in case of land and 5 days in case of buildings. The first requisite refers to the existence of the cause of action for unlawful detainer, while the second refers to the jurisdiction requirement of demand in order that said cause of action may be pursued.[31]

Both demands to pay installment due or adhere to the terms of the Contract to Sell and to vacate are necessary to make the vendee deforciant in order that an ejectmentsuit may be filed.[32] It is the vendor's demand for the vendee to vacate the premises and the vendee's refusal to do so which makes unlawful the withholding of the possession. [33] Such refusal violates the vendor's right of possession giving rise to an action for unlawful detainer.[34] However, prior to the institution of such action, a demand from the vendor to pay the installment due or comply with the conditions of the Contract to Sell and to vacate the premises is required under the aforequoted rule.

Thus, mere failure to pay the installment due or violation of the terms of the Contract to Sell does not automatically render a person's possession unlawful. Furthermore, the giving of such demand must be alleged in the complaint; otherwise, the MTC cannot acquire jurisdiction over the case.[35]

A review of the Complaint of petitioner discloses these pertinent allegations: petitioner owns the subject riceland; she executed a Contract to Sell in favor of respondents; pending full payment of the purchase price, possession of subject riceland was transferred to respondents subject to accounting and delivery of the harvest to petitioner; respondents failed to pay the installments and to account for and deliver the harvest; petitioner asked respondents to vacate the subject riceland, but they failed to do so. Accordingly, petitioner prayed for judgment ordering respondents to vacate the subject riceland and to pay P400,000.00 per year from September 1998 until they vacate as reasonable compensation for the use of the property, P120,000.00 as attorney's fees, and P50,000.00 as litigation expenses.

It is clear from the foregoing that the allegations in the Complaint failed to constitute a case of unlawful detainer. What is clear is that in the Complaint, petitioner alleged that respondents had violated the terms of the Contract to Sell. However, the Complaint failed to state that petitioner made demands upon respondents to comply with the conditions of the contract the payment of the installments and the accounting and delivery of the harvests from the subject riceland. The 10-day period granted respondents to vacate even fell short of the 15-day period mandated by law. When the complaint does not satisfy the jurisdictional requirements of a valid cause for unlawful detainer, the MTC does not have jurisdiction to hear the case.[36]

An allegation of a violation of a contract or agreement in a detainer suit may be proved by the presentation of competent evidence, upon which an MTC judge might make a finding to that effect, but certainly, that court cannot declare and hold that the contract is rescinded. The rescission of contract is a power vested in the RTC. [37] The rescission of the contract is the basis of, and therefore a condition precedent for, the illegality of a party's possession of a piece of realty. [38] Without judicial intervention and determination, even a stipulation entitling one party to take possession of the land and building, in case the other party violates the contract, cannot confer upon the former the right to take possession thereof, if that move is objected to.[39]

Clearly, the basic issue raised in the complaint of petitioner is not of possession but interpretation, enforcement and/or rescission of the contract, a matter that is beyond the jurisdiction of the MTC to hear and determine.

WHEREFORE, the instant petition is DENIED. The Decision dated May 13, 2003 of the Court of Appeals in CA-G.R. SP No. 68272 is AFFIRMED. Costs against petitioner.

SO ORDERED.

QUEZON CITY and THE CITY TREASURER OF QUEZON CITY, Petitioners,

G.R. No. 166408 Present: YNARES-SANTIAGO, J., Chairperson,

- versus -

AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: October 6, 2008

ABS-CBN BROADCASTING CORPORATION, Respondent.

x--------------------------------------------------x DECISION REYES, R.T., J.: CLAIMS for tax exemption must be based on language in law too plain to be mistaken. It cannot be made out of inference or implication. The principle is relevant in this petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) and that of the Regional Trial Court (RTC) ordering the refund and declaring invalid the imposition and collection of local franchise tax by the City Treasurer of Quezon City on ABS-CBN Broadcasting Corporation (ABS-CBN).
[2]

The Facts Petitioner City Government of Quezon City is a local government unit duly organized and existing by virtue of Republic Act (R.A.) No. 537, otherwise known as the Revised Charter of Quezon City. Petitioner City Treasurer of Quezon City is primarily responsible for the imposition and collection of taxes within the territorial jurisdiction ofQuezon City. Under Section 31, Article 13 of the Quezon City Revenue Code of 1993, [3] a franchise tax was imposed on businesses operating within its jurisdiction. The provision states: Section 31. Imposition of Tax. Any provision of special laws or grant of tax exemption to the contrary notwithstanding, any person, corporation, partnership or association enjoying a franchise whether issued by the national government or local government and, doing business in Quezon City, shall pay a franchise tax at the rate of ten percent (10%) of one percent (1%) for 1993-1994, twenty percent (20%) of one percent (1%) for 1995, and thirty percent (30%) of one percent (1%) for 1996 and the succeeding years thereafter, of gross receipts and sales derived from the operation of the business in Quezon City during the preceding calendar year. On May 3, 1995, ABS-CBN was granted the franchise to install and operate radio and television broadcasting stations in the Philippines under R.A. No. 7966.[4] Section 8 of R.A. No. 7966 provides the tax liabilities of ABS-CBN which reads: Section 8. Tax Provisions. The grantee, its successors or assigns, shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, as other persons or corporations are now hereafter may be required by law to pay. In addition thereto, the grantee, its successors or assigns, shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of the radio/television business transacted under this franchise by the grantee, its successors or assigns, and the said percentage tax shall be in lieu of all taxes on this franchise or earnings thereof; Provided that the grantee, its successors or assigns shall continue to be liable for income taxes under Title II of the National Internal Revenue Code pursuant to Section 2 of Executive No. 72 unless the latter enactment is amended or repealed, in which case the amendment or repeal shall be applicable thereto. (Emphasis added) ABS-CBN had been paying local franchise tax imposed by Quezon City. However, in view of the above provision in R.A. No. 9766 that it shall pay a franchise tax x x x in lieu of all taxes, the corporation developed the opinion that it is not liable to pay the local franchise tax imposed by Quezon City. Consequently, ABS-CBN paid under protest the local franchise tax imposed by Quezon City on the dates, in the amounts and under the official receipts as follows: O.R. No. 2464274 2484651 Date 07-18-95 10-20-95 Amount Paid P 1,489,977.28 1,489,977.28

2536134 8354906 0048756 0067352 Total

1-22-96 1-23-97 1-23-97 4-03-97

2,880,975.65 8,621,470.83 2,731,135.81 2,731,135.81 P19,944,672.66[5]

On January 29, 1997, ABS-CBN filed a written claim for refund for local franchise tax paid to Quezon City for 1996 and for the first quarter of 1997 in the total amount of Fourteen Million Two Hundred Thirty-Three Thousand Five Hundred EightyTwo and 29/100 centavos (P14,233,582.29) broken down as follows: O.R. No 2536134 8354906 0048756 Total Date 1-22-96 1-23-97 1-23-97 Amount Paid P 2,880,975.65 8,621,470.83 2,731,135.81 P14,233,582.29[6]

In a letter dated March 3, 1997 to the Quezon City Treasurer, ABS-CBN reiterated its claim for refund of local franchise taxes paid. On June 25, 1997, for failure to obtain any response from the Quezon City Treasurer, ABS-CBN filed a complaint before the RTC in Quezon City seeking the declaration of nullity of the imposition of local franchise tax by the City Government of Quezon City for being unconstitutional. It likewise prayed for the refund of local franchise tax in the amount of Nineteen Million Nine Hundred Forty-Four Thousand Six Hundred Seventy-Two and 66/100 centavos (P19,944,672.66) broken down as follows: O.R. No. 2464274 2484651 2536134 8354906 0048756 0067352 Total Date 7-18-95 10-20-95 1-22-96 1-23-97 1-23-97 4-03-97 Amount Paid P 1,489,977.28 1,489,977.28 2,880,975.65 8,621,470.83 2,731,135.81 2,731,135.81 P19,944,672.66[7]

Quezon City argued that the in lieu of all taxes provision in R.A. No. 9766 could not have been intended to prevail over a constitutional mandate which ensures the viability and self-sufficiency of local government units. Further, that taxes collectible by and payable to the local government were distinct from taxes collectible by and payable to the national government, considering that the Constitution specifically declared that the taxes imposed by local government units shall accrue exclusively to the local governments. Lastly, the City contended that the exemption claimed by ABS-CBN under R.A. No. 7966 was withdrawn by Congress when the Local Government Code (LGC) was passed.[8] Section 193 of the LGC provides: Section 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or -controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. (Emphasis added) On August 13, 1997, ABS-CBN filed a supplemental complaint adding to its claim for refund the local franchise tax paid for the third quarter of 1997 in the amount of Two Million Seven Hundred Thirty-One Thousand One Hundred Thirty-Five and 81/100 centavos (P2,731,135.81) and of other amounts of local franchise tax as may have been and will be paid by ABSCBN until the resolution of the case. Quezon City insisted that the claim for refund must fail because of the absence of a prior written claim for it. RTC and CA Dispositions On January 20, 1999, the RTC rendered judgment declaring as invalid the imposition on and collection from ABS-CBN of local franchise tax paid pursuant to Quezon City Ordinance No. SP-91, S-93, after the enactment of R.A. No. 7966, and ordered the refund of all payments made. The dispositive portion of the RTC decision reads: WHEREFORE, judgment is hereby rendered declaring the imposition on and collection from plaintiff ABS-CBN BROADCASTING CORPORATION of local franchise taxes pursuant to Quezon City Ordinance No. SP91, S-93 after the enactment of Republic Act No. 7966 to be invalid, and, accordingly, the Court hereby orders the defendants to refund all its payments made after the effectivity of its legislative franchise on May 3, 1995. SO ORDERED.[9] In its decision, the RTC ruled that the in lieu of all taxes provision contained in Section 8 of R.A. No. 7966 absolutely excused ABS-CBN from the payment of local franchise tax imposed under Quezon City Ordinance No. SP-91, S-93. The intent of the legislature to excuse ABS-CBN from payment of local franchise tax could be discerned from the usage of the in lieu of

all taxes provision and from the absence of any qualification except income taxes. Had Congress intended to exclude taxes imposed from the exemption, it would have expressly mentioned so in a fashion similar to the proviso on income taxes. The RTC also based its ruling on the 1990 case of Province of Misamis Oriental v. Cagayan Electric Power and Light Company, Inc. (CEPALCO).[10] In said case, the exemption of respondent electric company CEPALCO from payment of provincial franchise tax was upheld on the ground that the franchise of CEPALCO was a special law, while the Local Tax Code, on which the provincial ordinance imposing the local franchise tax was based, was a general law. Further, it was held that whenever there is a conflict between two laws, one special and particular and the other general, the special law must be taken as intended to constitute an exception to the general act. The RTC noted that the legislative franchise of ABS-CBN was granted years after the effectivity of the LGC. Thus, it was unavoidable to conclude that Section 8 of R.A. No. 7966 was an exception since the legislature ought to be presumed to have enacted it with the knowledge and awareness of the existence and prior enactment of Section 137[11]of the LGC. In addition, the RTC, again citing the case of Province of Misamis Oriental v. Cagayan Electric Power and Light Company, Inc. (CEPALCO),[12] ruled that the imposition of the local franchise tax was an impairment of ABS-CBNs contract with the government. The imposition of another franchise on the corporation by the local authority would constitute an impairment of the formers charter, which is in the nature of a private contract between it and the government. As to the amounts to be refunded, the RTC rejected Quezon Citys position that a written claim for refund pursuant to Section 196 of the LGC was a condition sine qua non before filing the case in court. The RTC ruled that although Fourteen Million Two Hundred Thirty-Three Thousand Five Hundred Eighty-Two and 29/100 centavos (P14,233,582.29) was the only amount stated in the letter to the Quezon City Treasurer claiming refund, ABS-CBN should nonetheless be also refunded of all payments made after the effectivity of R.A. No. 7966. The inaction of the City Treasurer on the claim for refund of ABSCBN legally rendered any further claims for refund on the part of plaintiff absurd and futile in relation to the succeeding payments. The City of Quezon and its Treasurer filed a motion for reconsideration which was subsequently denied by the RTC. Thus, appeal was made to the CA. On September 1, 2004, the CA dismissed the petition of Quezon City and its Treasurer. According to the appellate court, the issues raised were purely legal questions cognizable only by the Supreme Court. The CA ratiocinated: For another, the issues which appellants submit for this Courts consideration are more of legal query necessitating a legal opinion rather than a call for adjudication on the matter in dispute. xxxx The first issue has earlier been categorized in Province of Misamis Oriental v. Cagayan Electric and Power Co., Inc. to be a legal one. There is no more argument to this. The next issue although it may need the reexamination of the pertinent provisions of the local franchise and the legislative franchise given to appellee, also needs no evaluation of facts. It suffices that there may be a conflict which may need to be reconciled, without regard to the factual backdrop of the case. The last issue deals with a legal question, because whether or not there is a prior written claim for refund is no longer in dispute. Rather, the question revolves on whether the said requirement may be dispensed with, which obviously is not a factual issue.[13] On September 23, 2004, petitioner moved for reconsideration. The motion was, however, denied by the CA in its Resolution dated December 16, 2004. Hence, the present recourse. Issues Petitioner submits the following issues for resolution: I. Whether or not the phrase in lieu of all taxes indicated in the franchise of the respondent appellee (Section 8 of RA 7966) serves to exempt it from the payment of the local franchise tax imposed by the petitioners-appellants. II. Whether or not the petitioners-appellants raised factual and legal issues before the Honorable Court of Appeals.[14] Our Ruling The second issue, being procedural in nature, shall be dealt with immediately. But there are other resultant issues linked to the first. I. The dismissal by the CA of petitioners appeal is in order because it raised purely legal issues, namely:

1) Whether appellee, whose franchise expressly provides that its payment of franchise tax shall be in lieu of all taxes in this franchise or earnings thereof, is absolutely excused from paying the franchise tax imposed by appellants; 2) Whether appellants imposition of local franchise tax is a violation of appellees legislative franchise; and 3) Whether one can do away with the requirement on prior written claim for refund.[15] Obviously, these are purely legal questions, cognizable by this Court, to the exclusion of all other courts. There is a question of law when the doubt or difference arises as to what the law is pertaining to a certain state of facts.[16] Section 2, Rule 50 of the Rules of Court provides that an appeal taken to the CA under Rule 41 raising only questions of law is erroneous and shall be dismissed, issues of pure law not being within its jurisdiction.[17] Consequently, the dismissal by the CA of petitioners appeal was in order. In the recent case of Sevilleno v. Carilo,[18] this Court ruled that the dismissal of the appeal of petitioner was valid, considering the issues raised there were pure questions of law, viz.: Petitioners interposed an appeal to the Court of Appeals but it was dismissed for being the wrong mode of appeal. The appellate court held that since the issue being raised is whether the RTC has jurisdiction over the subject matter of the case, which is a question of law, the appeal should have been elevated to the Supreme Court under Rule 45 of the 1997 Rules of Civil Procedure, as amended. Section 2, Rule 41 of the same Rules which governs appeals from judgments and final orders of the RTC to the Court of Appeals, provides: SEC. 2. Modes of appeal. (a) Ordinary appeal. The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be taken by

filing a notice of appeal with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party. No record on appeal shall be required except in special proceedings and other cases of multiple or separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be filed and served in like manner. (b) Petition for review. The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its appellate jurisdiction shall be by petition for review in accordance with Rule 42. (c) Appeal by certiorari. In all cases where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45. In Macawili Gold Mining and Development Co., Inc. v. Court of Appeals, we summarized the rule on appeals as follows: (1) In all cases decided by the RTC in the exercise of its original jurisdiction, appeal may be made to the Court of Appeals by mere notice of appeal where the appellant raises questions of fact or mixed questions of fact and law; (2) In all cases decided by the RTC in the exercise of its original jurisdiction where the appellant raises only questions of law, the appeal must be taken to the Supreme Court on a petition for review on certiorari under Rule 45; (3) All appeals from judgments rendered by the RTC in the exercise of its appellate jurisdiction, regardless of whether the appellant raises questions of fact, questions of law, or mixed questions of fact and law, shall be brought to the Court of Appeals by filing a petition for review under Rule 42. It is not disputed that the issue brought by petitioners to the Court of Appeals involves the jurisdiction of the RTC over the subject matter of the case. We have a long standing rule that a courts jurisdiction over the subject matter of an action is conferred only by the Constitution or by statute. Otherwise put, jurisdiction of a court over the subject matter of the action is a matter of law. Consequently, issues which deal with the jurisdiction of a court over the subject matter of a case are pure questions of law. As petitioners appeal solely involves a question of law, they should have directly taken their appeal to this Court by filing a petition for review on certiorari under Rule 45, not an ordinary appeal with the Court of Appeals under Rule 41. Clearly, the appellate court did not err in holding that petitioners pursued the wrong mode of appeal.

Indeed, the Court of Appeals did not err in dismissing petitioners appeal. Section 2, Rule 50 of the same Rules provides that an appeal from the RTC to the Court of Appeals raising only questions of law shall be dismissed; and that an appeal erroneously taken to the Court of Appeals shall be dismissed outright, x x x.[19] (Emphasis added) However, to serve the demands of substantial justice and equity, the Court opts to relax procedural rules and rule upon on the merits of the case. In Ong Lim Sing Jr. v. FEB Leasing and Finance Corporation,[20] this Court stated: Courts have the prerogative to relax procedural rules of even the most mandatory character, mindful of the duty to reconcile both the need to speedily put an end to litigation and the parties right to due process. In numerous cases, this Court has allowed liberal construction of the rules when to do so would serve the demands of substantial justice and equity. In Aguam v. Court of Appeals, the Court explained: The court has the discretion to dismiss or not to dismiss an appellants appeal. It is a power conferred on the court, not a duty. The discretion must be a sound one, to be exercised in accordance with the tenets of justice and fair play, having in mind the circumstances obtaining in each case. Technicalities, however, must be avoided. The law abhors technicalities that impede the cause of justice. The courts primary duty is to render or dispense justice. A litigation is not a game of technicalities. Lawsuits unlike duels are not to be won by a rapiers thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. Litigations must be decided on their merits and not on technicality. Every party litigant must be afforded the amplest opportunity for the proper and just determination of his cause, free from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought not to be applied in a very rigid, technical sense; rules of procedure are used only to help secure, not override substantial justice. It is a far better and more prudent course of action

for the court to excuse a technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of justice.[21] II. The in lieu of all taxes provision in its franchise does not exempt ABS-CBN from payment of local franchise tax. A. The present controversy essentially boils down to a dispute between the inherent taxing power of Congress and the delegated authority to tax of local governments under the 1987 Constitution and effected under the LGC of 1991. The power of the local government of Quezon City to impose franchise tax is based on Section 151 in relation to Section 137 of the LGC, to wit: Section 137. Franchise Tax. Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at the rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized within its territorial jurisdiction. x x x xxxx Section 151. Scope of Taxing Powers. Except as otherwise provided in this Code, the city may levy the taxes, fees and charges which the province or municipality may impose:Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and component cities shall accrue to them and distributed in accordance with the provisions of this Code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes. (Emphasis supplied) Such taxing power by the local government, however, is limited in the sense that Congress can enact legislation granting exemptions. This principle was upheld in City Government of Quezon City, et al. v. Bayan Telecommunications, Inc. [22] Said this Court:

This thus raises the question of whether or not the Citys Revenue Code pursuant to which the city treasurer of Quezon City levied real property taxes against Bayantels real properties located within the City effectively withdrew the tax exemption enjoyed by Bayantel under its franchise, as amended. Bayantel answers the poser in the negative arguing that once again it is only liable to pay the same taxes, as any other persons or corporations on all its real or personal properties, exclusive of its franchise. Bayantels posture is well-taken. While the system of local government taxation has changed with the onset of the 1987 Constitution, the power of local government units to tax is still limited. As we explained in Mactan Cebu International Airport Authority: The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely be virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may provide which, however, must be consistent with the basic policy of local autonomy. x x x Clearly then, while a new slant on the subject of local taxation now prevails in the sense that the former doctrine of local government units delegated power to tax had been effectively modified with Article X, Section 5 of the 1987 Constitution now in place, the basic doctrine on local taxation remains essentially the same. For as the Court stressed in Mactan, the power to tax is [still] primarily vested in the Congress. This new perspective is best articulated by Fr. Joaquin G. Bernas, S.J., himself a Commissioner of the 1986 Constitutional Commission which crafted the 1987 Constitution, thus: What is the effect of Section 5 on the fiscal position of municipal corporations? Section 5 does not change the doctrine that municipal corporations do not possess inherent powers of taxation. What it does is to confer municipal corporations a general power to levy taxes and otherwise create sources of revenue. They no longer have to wait for a statutory grant of these powers. The power of the legislative authority relative to the fiscal powers of local governments has been reduced to the authority to impose limitations on municipal powers. Moreover, these limitations must be consistent with the basic policy of local autonomy. The important legal effect of Section 5 is thus to reverse the principle that doubts are resolved against municipal corporations. Henceforth, in interpreting statutory provisions on municipal fiscal powers, doubts will be resolved in favor

of municipal corporations. It is understood, however, that taxes imposed by local government must be for a public purpose, uniform within a locality, must not be confiscatory, and must be within the jurisdiction of the local unit to pass. In net effect, the controversy presently before the Court involves, at bottom, a clash between the inherent taxing power of the legislature, which necessarily includes the power to exempt, and the local governments delegated power to tax under the aegis of the 1987 Constitution. Now to go back to the Quezon City Revenue Code which imposed real estate taxes on all real properties within the citys territory and removed exemptions theretofore previously granted to, or presently enjoyed by all persons, whether natural or juridical [x x x] there can really be no dispute that the power of the Quezon City Government to tax is limited by Section 232 of the LGC which expressly provides that a province or city or municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted. Under this law, the Legislature highlighted its power to thereafter exempt certain realties from the taxing power of local government units. An interpretation denying Congress such power to exempt would reduce the phrase not hereinafter specifically exempted as a pure jargon, without meaning whatsoever. Needless to state, such absurd situation is unacceptable. For sure, in Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of Davao, this Court has upheld the power of Congress to grant exemptions over the power of local government units to impose taxes. There, the Court wrote: Indeed, the grant of taxing powers to local government units under the Constitution and the LGC does not affect the power of Congress to grant exemptions to certain persons, pursuant to a declared national policy. The legal effect of the constitutional grant to local governments simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations.[23] (Emphasis supplied) In the case under review, the Philippine Congress enacted R.A. No. 7966 on March 30, 1995, subsequent to the effectivity of the LGC on January 1, 1992. Under it,ABS-CBN was granted the franchise to install and operate radio and television broadcasting stations in the Philippines. Likewise, Section 8 imposed on ABS-CBN the duty of paying 3% franchise tax. It bears stressing, however, that payment of the percentage franchise tax shall be in lieu of all taxes on the said franchise.[24] Congress has the inherent power to tax, which includes the power to grant tax exemptions. On the other hand, the power of Quezon City to tax is prescribed by Section 151 in relation to Section 137 of the LGC which expressly provides that notwithstanding any exemption granted by any law or other special law, the City may impose a franchise tax. It must be noted that Section 137 of the LGC does not prohibit grant of future exemptions. As earlier discussed, this Court in City Government of Quezon City v. Bayan Telecommunications, Inc.[25] sustained the power of Congress to grant tax exemptions over and above the power of the local governments delegated power to tax. B. The more pertinent issue now to consider is whether or not by passing R.A. No. 7966, which contains the in lieu of all taxes provision, Congress intended to exemptABS-CBN from local franchise tax. Petitioners argue that the in lieu of all taxes provision in ABS-CBNs franchise does not expressly exempt it from payment of local franchise tax. They contend that a tax exemption cannot be created by mere implication and that one who claims tax exemptions must be able to justify his claim by clearest grant of organic law or statute. Taxes are what civilized people pay for civilized society. They are the lifeblood of the nation. Thus, statutes granting tax exemptions are construed stricissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of tax exemption must be clearly shown and based on language in law too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. [26] The burden of proof rests upon the party claiming the exemption to prove that it is in fact covered by the exemption so claimed.[27] The basis for the rule on strict construction to statutory provisions granting tax exemptions or deductions is to minimize differential treatment and foster impartiality, fairness and equality of treatment among taxpayers. [28] He who claims an exemption from his share of common burden must justify his claim that the legislature intended to exempt him by unmistakable terms. For exemptions from taxation are not favored in law, nor are they presumed. They must be expressed in the clearest and most unambiguous language and not left to mere implications. It has been held that exemptions are never presumed, the burden is on the claimant to establish clearly his right to exemption and cannot be made out of inference or implications but must be laid beyond reasonable doubt. In other words, since taxation is the rule and exemption the exception, the intention to make an exemption ought to be expressed in clear and unambiguous terms.[29] Section 8 of R.A. No. 7966 imposes on ABS-CBN a franchise tax equivalent to three (3) percent of all gross receipts of the radio/television business transacted under the franchise and the franchise tax shall be in lieu of all taxes on the franchise or earnings thereof. The in lieu of all taxes provision in the franchise of ABS-CBN does not expressly provide what kind of taxes ABSCBN is exempted from. It is not clear whether the exemption would include both local, whether municipal, city or provincial,

and national tax. What is clear is that ABS-CBN shall be liable to pay three (3) percent franchise tax and income taxes under Title II of the NIRC. But whether the in lieu of all taxes provision would include exemption from local tax is not unequivocal. As adverted to earlier, the right to exemption from local franchise tax must be clearly established and cannot be made out of inference or implications but must be laid beyond reasonable doubt. Verily, the uncertainty in the in lieu of all taxes provision should be construed against ABS-CBN. ABS-CBN has the burden to prove that it is in fact covered by the exemption so claimed. ABS-CBN miserably failed in this regard. ABS-CBN cites the cases Carcar Electric & Ice Plant v. Collector of Internal Revenue,[30] Manila Railroad v. Rafferty, Philippine Railway Co. v. Collector of Internal Revenue,[32] and Visayan Electric Co. v. David[33] to support its claim that that the in lieu of all taxes clause includes exemption from all taxes.
[31]

However, a review of the foregoing case law reveals that the grantees respective franchises expressly exempt them from municipal and provincial taxes. Said the Court inManila Railroad v. Rafferty:[34] On the 7th day of July 1906, by an Act of the Philippine Legislature, a special charter was granted to the Manila Railroad Company. Subsection 12 of Section 1 of said Act (No. 1510) provides that: In consideration of the premises and of the granting of this concession or franchise, there shall be paid by the grantee to the Philippine Government, annually, for the period of thirty (30) years from the date hereof, an amount equal to one-half (1/2) of one per cent of the gross earnings of the grantee in respect of the lines covered hereby for the preceding year; after said period of thirty (30) years, and for the fifty (50) years thereafter, the amount so to be paid annually shall be an amount equal to one and one-half (1) per cent of such gross earnings for the preceding year; and after such period of eighty (80) years, the percentage and amount so to be paid annually by the grantee shall be fixed by the Philippine Government. Such annual payments, when promptly and fully made by the grantee, shall be in lieu of all taxes of every name and nature municipal, provincial or central upon its capital stock, franchises, right of way, earnings, and all other property owned or operated by the grantee under this concession or franchise.[35] (Underscoring supplied) In the case under review, ABS-CBNs franchise did not embody an exemption similar to those in Carcar, Manila Railroad, Philippine Railway, and Visayan Electric. Too, the franchise failed to specify the taxing authority from whose jurisdiction the taxing power is withheld, whether municipal, provincial, or national. In fine, since ABS-CBNfailed to justify its claim for exemption from local franchise tax, by a grant expressed in terms too plain to be mistaken its claim for exemption for local franchise tax must fail. C. The in lieu of all taxes clause in the franchise of ABS-CBN has become functus officio with the abolition of the franchise tax on broadcasting companies with yearly gross receipts exceeding Ten Million Pesos. In its decision dated January 20, 1999, the RTC held that pursuant to the in lieu of all taxes provision contained in Section 8 of R.A. No. 7966, ABS-CBN is exempt from the payment of the local franchise tax. The RTC further pronounced that ABS-CBN shall instead be liable to pay a franchise tax of 3% of all gross receipts in lieu of all other taxes. On this score, the RTC ruling is flawed. In keeping with the laws that have been passed since the grant of ABS-CBNs franchise, the corporation should now be subject to VAT, instead of the 3% franchise tax.

At the time of the enactment of its franchise on May 3, 1995, ABS-CBN was subject to 3% franchise tax under Section 117(b) of the 1977 National Internal Revenue Code (NIRC), as amended, viz.: SECTION 117. Tax on franchises. Any provision of general or special laws to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchise, upon the gross receipts from the business covered by the law granting the franchise, a tax in accordance with the schedule prescribed hereunder: (a) On electric utilities, city gas, and water supplies Two (2%) percent (b) On telephone and/or telegraph systems, radio and/or broadcasting stations Three (3%) percent (c) On other franchises Five (5%) percent. (Emphasis supplied) On January 1, 1996, R.A. No. 7716, otherwise known as the Expanded Value Added Tax Law,[36] took effect and subjected to VAT those services rendered by radio and/or broadcasting stations. Section 3 of R.A. No. 7716 provides: Section 3. Section 102 of the National Internal Revenue Code, as amended is hereby further amended to read as follows: SEC. 102. Value-added tax on sale of services and use or lease of properties. (a) Rate and base of tax. There shall be levied, assessed and collected, as value-added tax

equivalent to 10% of gross receipts derived from the sale or exchange of services, including the use or lease of properties. The phrase sale or exchange of services means the performance of all kinds of services in the Philippines, for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; x x x services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 117 of this Code; x x x (Emphasis supplied) Notably, under the same law, telephone and/or telegraph systems, broadcasting stations and other franchise grantees were omitted from the list of entities subject to franchise tax. The impression was that these entities were subject to 10% VAT but not to franchise tax. Only the franchise tax on electric, gas and water utilities remained. Section 12 of R.A. No. 7716 provides: Section 12. Section 117 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: SEC. 117. Tax on Franchises. Any provision of general or special law to the contrary notwithstanding there shall be levied, assessed and collected in respect to all franchises on electric, gas and water utilities a tax of two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise. (Emphasis added) Subsequently, R.A. No. 8241[37] took effect on January 1, 1997[38] containing more amendments to the NIRC. Radio and/or television companies whose annual gross receipts do not exceed P10,000,000.00 were granted the option to choose between paying 3% national franchise tax or 10% VAT. Section 9 of R.A. No. 8241 provides: SECTION 9. Section 12 of Republic Act No. 7716 is hereby amended to read as follows: Sec. 12. Section 117 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: Sec. 117. Tax on franchise. Any provision of general or special law to the contrary, notwithstanding, there shall be levied, assessed and collected in respect to all franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year does not exceed Ten million pesos (P10,000,000.00), subject to Section 107(d) of this Code, a tax of three percent (3%) and on electric, gas and water utilities, a tax of two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise: Provided, however, That radio and television broadcasting companies referred to in this section, shall have an option to be registered as a value-added tax payer and pay the tax due thereon: Provided, further, That once the option is exercised, it shall not be revoked. (Emphasis supplied) On the other hand, radio and/or television companies with yearly gross receipts exceeding P10,000,000.00 were subject to 10% VAT, pursuant to Section 102 of the NIRC. On January 1, 1998, R.A. No. 8424[39] was passed confirming the 10% VAT liability of radio and/or television companies with yearly gross receipts exceedingP10,000,000.00. R.A. No. 9337 was subsequently enacted and became effective on July 1, 2005. The said law further amended the NIRC by increasing the rate of VAT to 12%. The effectivity of the imposition of the 12% VAT was later moved from January 1, 2006 to February 1, 2006. In consonance with the above survey of pertinent laws on the matter, ABS-CBN is subject to the payment of VAT. It does not have the option to choose between the payment of franchise tax or VAT since it is a broadcasting company with yearly gross receipts exceeding Ten Million Pesos (P10,000,000.00). VAT is a percentage tax imposed on any person whether or not a franchise grantee, who in the course of trade or business, sells, barters, exchanges, leases, goods or properties, renders services. It is also levied on every importation of goods whether or not in the course of trade or business. The tax base of the VAT is limited only to the value added to such goods, properties, or services by the seller, transferor or lessor. Further, the VAT is an indirect tax and can be passed on to the buyer. The franchise tax, on the other hand, is a percentage tax imposed only on franchise holders. It is imposed under Section 119 of the Tax Code and is a direct liability of the franchise grantee.The clause in lieu of all taxes does not pertain to VAT or any other tax. It cannot apply when what is paid is a tax other than a franchise tax. Since the franchise tax on the broadcasting companies with yearly gross receipts exceeding ten million pesos has been abolished, the in lieu of all taxes clause has now become functus officio, rendered inoperative. In sum, ABS-CBNs claims for exemption must fail on twin grounds. First, the in lieu of all taxes clause in its franchise failed to specify the taxes the company is sought to be exempted from. Neither did it particularize the jurisdiction

from which the taxing power is withheld. Second, the clause has become functus officio because as the law now stands, ABSCBN is no longer subject to a franchise tax. It is now liable for VAT. WHEREFORE, the petition is GRANTED and the appealed Decision REVERSED AND SET ASIDE. The petition in the trial court for refund of local franchise tax is DISMISSED.SO ORDERED.